About

The Research Fellows Program is no longer active. This is an archive page of a past CFI program.
The CFI Research Fellows Program encouraged independent researchers and analysts to systematically examine some of the most important challenges in financial inclusion. Each year, we announced a research agenda and selected a cohort of fellows. The Program afforded fellows the opportunity to perform research, analysis, or writing on an important topic, and to share insights and recommendations broadly with the financial inclusion community.

Publications by Fellows

Blog Post

Each year, World Consumer Rights Day is celebrated on March 15 as a means of raising global awareness about consumer rights and needs. To join in spreading the awareness, this post outlines current risks and opportunities emerging in the field of consumer protection.

By October 2022, when <a href="https://financialinclusionweek.org/" target="_blank" rel="noopener noreferrer">Financial Inclusion Week</a> (FIW) was held, the world was beginning to emerge from more than two years of pandemic lockdowns and accelerated digitalization. The Global Findex 2021 showed that the share of adults in developing economies making or receiving digital payments <a href="https://www.worldbank.org/en/publication/globalfindex" target="_blank" rel="noopener noreferrer">grew from 35 percent in 2014 to 57 percent in 2021</a>, with over one-third of adults paying their utility bills digitally for the first time during COVID. In addition, growth in digital lending <a href="https://www.jbs.cam.ac.uk/wp-content/uploads/2021/03/2020-ccaf-global-covid-fintech-market-rapid-assessment-study-v2.pdf" target="_blank" rel="noopener noreferrer">dropped by 8 percent</a> in the first two quarters of 2020 but showed a <a href="https://openknowledge.worldbank.org/bitstream/handle/10986/36883/9781464817304_Ch04.pdf" target="_blank" rel="noopener noreferrer">strong recovery when lockdowns eased</a>.

While these numbers reveal opportunities to use digital financial services to drive financial inclusion, there is also evidence of rising risks that can increase vulnerabilities among newly included consumers. CGAP’s research found that the frequency, breadth, and complexity of risks <a href="https://www.cgap.org/research/reading-deck/evolution-of-nature-and-scale-of-dfs-consumer-risks-review-of-evidence" target="_blank" rel="noopener noreferrer">have increased since 2017</a>. The <a href="https://finaccess.knbs.or.ke/reports-and-datasets" target="_blank" rel="noopener noreferrer">2021 FinAccess Survey</a> found that 47 percent of Kenyans using mobile money have lost funds, a sharp increase from the 8 percent who had cited the same problem in 2019. Digitalization has rapidly increased identity theft, fraud, and mobile money scams.

The impact of these risks is not experienced uniformly by all consumer segments. This indicates that our approach to consumer protection needs a more nuanced, segmented approach to address vulnerabilities. Data from the United Nation’s 2022 <a href="https://www.unwomen.org/sites/default/files/2022-09/Progress-on-the-sustainable-development-goals-the-gender-snapshot-2022-en_0.pdf" target="_blank" rel="noopener noreferrer">Progress on the Sustainable Development Goals</a> report is not encouraging. According to the report, it will take us approximately 300 years to address discriminatory laws and close prevailing gaps in legal protection for women. In addition to issues of fraud and financial losses that all consumers experience, women are also subject to greater harassment due to breaches of privacy and online harassment.
<h1>Consumer Protection was a Clear Focal Point at FIW 2022</h1>
This rise in consumer risks has not gone unnoticed by the inclusive finance community. The urgency to address these risks, particularly before consumer trust in digital financial services is eroded, was a leitmotif across many of the sessions at Financial Inclusion Week 2022. For example, in <a href="https://www.youtube.com/watch?v=J0QaPM6sDDk&amp;list=PL30fMMRd3G_4ysbJRWLiVICDCCHEKSTMY&amp;index=1&amp;t=11s" target="_blank" rel="noopener noreferrer">CFI’s global plenary</a>, we discussed the need to embed privacy into the design and delivery of financial services, and expert panelists highlighted international examples to illustrate how this might be done.
<blockquote class="pullquote--right">The urgency to address these risks, particularly before consumer trust in digital financial services is eroded, was a leitmotif across many of the sessions at Financial Inclusion Week 2022.</blockquote>
Digitalization tends to exacerbate existing risks and introduces new risks that must also be detected and addressed. Standards such as the <a href="https://www.ada-microfinance.org/en/toolbox/social-and-environmental-performance#:~:text=The%20Universal%20Standards%20for%20Social%20and%20Environmental%20Performance,Universal%20Standards%20take%20into%20account%20seven%20fundamental%20dimensions%3A" target="_blank" rel="noopener noreferrer">Universal Standards for Social and Environmental Performance Management</a>, SPTF’s <a href="https://cerise-sptf.org/digital-financial-services/" target="_blank" rel="noopener noreferrer">Standards for Responsible Digital Financial Services</a>, and others emerged as important tools to address existing risks. In a session <a href="https://www.youtube.com/watch?v=CJ9_P7bGOvA&amp;list=PL30fMMRd3G_4ysbJRWLiVICDCCHEKSTMY&amp;index=4&amp;t=2540s" target="_blank" rel="noopener noreferrer">hosted by SPTF</a>, there was agreement among discussants that standards provide a guideline for best practices for known risks. However, these guidelines may need to be adapted to specific contexts and may not reflect emerging risks or be sufficient to address them.

A <a href="https://www.youtube.com/watch?v=kYmfrSk094w&amp;list=PL30fMMRd3G_4ysbJRWLiVICDCCHEKSTMY&amp;index=3&amp;t=8s" target="_blank" rel="noopener noreferrer">session by Incofin</a> highlighted investors as an important stakeholder group to enforce best practices through due diligence and monitoring. And in <a href="https://www.youtube.com/watch?v=7y8x44tLk2I&amp;list=PL30fMMRd3G_4ysbJRWLiVICDCCHEKSTMY&amp;index=6" target="_blank" rel="noopener noreferrer">CFI’s on-demand session</a>, we also spoke to investors about how they shape market-level incentives through advocacy and catalytic capital investments. Catalytic capital investors can spur lending in underdeveloped markets while extending a stamp of responsible lending to companies they invest in at an early stage.
<h1>The Way Forward</h1>
As technology increasingly affects inclusive financial services, consumer protection risks are beginning to arise from areas outside the remit of traditional financial sector regulation. In addition, consumers must face risks from newer sources, which impact their financial lives. These new sources of risk include climate shocks, changes in weather patterns, the evolving nature of work, and factors like changing societal structures and norms. These risks can cause vulnerabilities in consumers’ lives at any stage of their interaction with financial services.

Consumer research, policy advocacy, and legislation must adapt to this new normal to take a different lens on identifying and addressing these challenges. By doing so, the industry can help low-income consumers achieve the goals of financial resilience and well-being. CFI’s consumer protection strategy addresses this by using a <a href="https://www.strivecommunity.org/insights/financial-services/consumer-protection" target="_blank" rel="noopener noreferrer">vulnerability framework</a> that identifies where consumer vulnerability is liable to exist in financial services. Identifying causes of vulnerability at any point in the consumer’s life captures moments where consumer resilience can be eroded and thus requires action by various stakeholder groups – investors, regulators, supervisors, and policymakers.
<blockquote>Identifying causes of vulnerability at any point in the consumer’s life requires action by various stakeholder groups – investors, regulators, supervisors, and policymakers.</blockquote>
CFI also convenes the <a href="https://globalrff.org" target="_blank" rel="noopener noreferrer">Responsible Finance Forum</a> (RFF), a global platform for dialogue and knowledge sharing on responsible inclusive finance and consumer protection. The RFF aims to confront the changing nature of consumer risks and collectively arrive at solutions that the inclusive finance industry can adopt to deliver financial services responsibly.

View the full <a href="https://www.youtube.com/playlist?list=PL30fMMRd3G_4ysbJRWLiVICDCCHEKSTMY" target="_blank" rel="noopener noreferrer">Consumer Protection playlist</a> from FIW 2022.

Financial Inclusion Week 2022 had over 3,300 registered participants from 2,000 organizations across 148 countries. With almost 400 speakers and 125 sessions, FIW 2022 was the largest event to date. All sessions from FIW 2022 can be viewed <a href="https://financialinclusionweek.org/2022-event" target="_blank" rel="noopener noreferrer">here</a>.

And be sure to save the date for FIW 2023, which will take place October 16-19, 2023.

FIW Recap: Consumer Protection – Crucial to Driving the Inclusive Finance Agenda

A North Star or a Measurement Pulse? The role of financial health in inclusive finance

At COP27, the finance ministers from <a href="http://www.v-20.org/" target="_blank" rel="noopener noreferrer">58 climate-vulnerable economies</a> estimated that 98 percent of their nearly 1.5 billion citizens lack financial protection – a massive source of vulnerability for countries that already have lost about 20 percent of their collective GDP, or $525 billion, due to climate shocks since the year 2000. The past year alone was one of the worst in history: floods in Pakistan killed 1,700 people and left one-third of the country underwater. Persistent drought in East Africa has killed livestock and destroyed livelihoods. In Fiji, communities have been forced to relocate to escape rising sea levels. Initiatives discussed at COP27, such as the “<a href="https://www.v-20.org/v20-and-g7-jointly-launch-global-shield-against-climate-risks-at-cop27" target="_blank" rel="noopener noreferrer">Global Shield</a>” for quickly deploying financial support during climate disasters, and a fund to cover “<a href="https://www.v-20.org/climate-vulnerability-monitor%3A-climate-change-causes-loss-and-damage%2C-unequally-impacts-vulnerable-nations-and-indiscriminately-creates-global-crises" target="_blank" rel="noopener noreferrer">loss and damage</a>,” are designed to help vulnerable countries deal with the consequences of these shocks.

The role of the inclusive finance sector in this context is still up for debate. On the one hand, the role varies depending on the <a href="https://openknowledge.worldbank.org/handle/10986/22787" target="_blank" rel="noopener noreferrer">nature of climate impact</a>: Long-term gradual impact, such as sea-level rise and soil salinization, requires different coping mechanisms compared to sudden climate shocks like floods and hurricanes. On the other hand, the sector still lacks a quantitative layer to assess the role that inclusive finance can play in building resilience at the country level.  The sector has made progress in <a href="https://gain.nd.edu/our-work/country-index/" target="_blank" rel="noopener noreferrer">measuring vulnerability</a> and understanding the <a href="https://www.centerforfinancialinclusion.org/green-inclusive-finance-a-framework-for-understanding-how-financial-services-can-help-low-income-people-weather-climate-related-risks">impact pathways</a> and <a href="https://www.afi-global.org/thematic-areas/inclusive-green-finance/" target="_blank" rel="noopener noreferrer">policy options</a> in <a href="https://www.centerforfinancialinclusion.org/green-inclusive-finance-a-framework-for-understanding-how-financial-services-can-help-low-income-and-vulnerable-people-respond-to-climate-change">green inclusive finance.</a> But we still have a limited quantitative understanding of how inclusive finance can help prepare for and respond to climate shocks.  

Let’s examine how we can better address these gaps.


<img class="aligncenter wp-image-45751 size-full" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2023/02/Climate-shocks1-1-e1677015126745.png" alt="" width="1139" height="523" />
<h1>What Do We Know About Climate Shocks and Finance?</h1>
Answering the question of how households in developing economies prepare for and deal with climate shocks is not straightforward. <a href="https://www.cambridge.org/core/journals/environment-and-development-economics/article/abs/impacts-of-climate-shocks-on-household-consumption-and-inequality-in-india/EFA38EF02ED73ECDBD11D596322C285F" target="_blank" rel="noopener noreferrer">Research</a> has shown that most households affected by shocks face increased expenses. They need to secure their food supplies, make essential house repairs and replace essential tools and equipment, including mobile phones, electricity, livestock and farming equipment, that were damaged or lost. The range of immediate needs is extremely diverse and context dependent, hence virtually impossible to map comprehensively.

What we can model more accurately, however, is the role that financial services can play in the context of climate shocks. Existing literature (e.g.: <a href="https://openknowledge.worldbank.org/bitstream/handle/10986/26511/114634-WP-P162629-PUBLIC-ForumTheRoleofFinancialServicesinHumanitarianCrises.pdf?sequence=1&amp;isAllowed=y">El-Zoghbi et al 2017</a> <a href="https://link.springer.com/article/10.1007/s10584-013-1035-6#citeas">and Linnerooth and Hochrainer 2015</a>) has created useful taxonomies that show that households have limited financial options in face of calamities. They can:

<img class=" wp-image-45753 alignright" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2023/02/Screenshot-2023-02-21-at-12.37.30-PM.png" alt="" width="572" height="659" />
<h4>1. Tap into their own funds:</h4>
Households and small businesses often turn to their own savings as the <a href="https://www.centerforfinancialinclusion.org/preparing-msmes-for-future-crises-lessons-from-covid-19">first source of emergency funds</a> to pay for urgent needs. To be accessible in the short term, savings need to be liquid and safe.
<h4>2. Access solidarity networks:</h4>
Help from social networks, via remittances, mobile payments, and other means, can be vital during emergencies. To receive this money digitally, households need accounts at financial institutions or mobile money accounts, and they need to have access to cash-in/cash-out points such as bank agents and mobile money agents. <a href="https://www.cgap.org/blog/agent-networks-vital-covid-19-response-need-support" target="_blank" rel="noopener noreferrer">Disruptions to the agents’ networks</a> can limit the effectiveness of remittances in the context of shocks.
<h4>3. G2P payments and humanitarian aid:</h4>
Government payments (G2P) and various forms of humanitarian cash transfers can play a critical role in building resilience to climate shocks. In particular, “<a href="https://www.worldbank.org/en/publication/human-capital/publication/adaptive-social-protection-building-resilience-to-shocks-key-findings" target="_blank" rel="noopener noreferrer">adaptive” social protection</a> programs can be designed to address contexts of emergencies such as climate shocks.
<h4>4. Leverage formal financial services:</h4>
Households may be able to access <a href="https://www.cgap.org/blog/state-of-climate-responsive-financial-product-landscape" target="_blank" rel="noopener noreferrer">traditional financial services,</a> such as <a href="https://www.sciencedirect.com/science/article/pii/S0305750X16305587" target="_blank" rel="noopener noreferrer">credit</a> and insurance, to address their increased expenses. However, payouts may be slow and access challenging for consumers with thin credit files.

Another critical dimension is the speed with which households can access financial resources. Timing can vary from days or weeks, to far longer. For example, illiquid savings such as land and cattle for a farmer may be of little use in an emergency, irrespective of how valuable these assets are. Similarly, if payouts are too slow, formal loans and insurance products may fail to improve a household’s resilience.
<h1>Which Countries Show Financial Resilience?</h1>
To answer this question, we looked at data showing which countries are most exposed to climate shocks and how easily their populations can access different forms of finance.
<h3>1. Exposure to climate shocks</h3>
Looking at climate shocks at the country level, we found that populous countries like India, China, and the Philippines were the most exposed. To measure this, we used data on natural disasters from <a href="https://www.emdat.be/">CRED</a> and calculated the number of people who were affected by or who had died from a natural disaster between 2011 and 2021. Disasters examined included droughts, extreme temperatures, floods, landslides, storms and wildfires. However, when we normalize the indicator by population size (see table below), we see that some of the world’s poorest countries, like Afghanistan and South Sudan, had some of the highest rates of exposure to climate shocks.

<img class="alignnone wp-image-45774 size-full" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2023/02/Climate-shocks3-1-e1677081121356.png" alt="" width="3233" height="1657" />
<h3>2. Access to emergency funds</h3>
Next, we measured whether people in countries most exposed to climate shocks could access emergency funds within 30 days.  The chart below shows that South Asian countries such as India, Afghanistan, Bangladesh, and Pakistan are the most vulnerable. Not only do they have the highest number of people affected by climate shocks in absolute terms, households also have the least ability to come up with emergency funds. India is by far the most affected. CRED estimates that almost 500 million people in that country were cumulatively affected by climate shocks in the last decade, primarily from events such as the <a href="https://reliefweb.int/report/india/drought-india-2015-16-when-coping-crumbles-rapid-assessment-impact-drought-children-and" target="_blank" rel="noopener noreferrer">drought in 2015-16</a> and the <a href="https://en.wikipedia.org/wiki/2018_Kerala_floods#:~:text=On%2016%20August%202018%2C%20severe,died%2C%20and%2015%20are%20missing." target="_blank" rel="noopener noreferrer">2018 Kerala floods</a> among others, and yet fewer than 10 percent can access emergency funds within 30 days. Other countries such as the Philippines, Brazil, Kenya and South Africa perform only slightly better, with 15-20 percent of individuals capable of accessing emergency funds; this means that four in five individuals are financially exposed to climate risks.  In contrast, the bottom right quadrant shows that Eastern European countries such as Serbia, Ukraine and Bulgaria are relatively less vulnerable, having lower exposure to climate shocks and higher capacity to come up with emergency funds.

&nbsp;

<img class="wp-image-45785 aligncenter" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2023/02/scatter_emergency.png" alt="" width="890" height="741" />
<h3>3. Access to finance</h3>
Our analysis mapped the exposure to climate risks with the levels of access to financial services. We used <a href="https://www.worldbank.org/en/publication/globalfindex/Data" target="_blank" rel="noopener noreferrer">Findex data</a> to measure access to digital payments, savings, loans and G2P payments, which our conceptual framework identified as important coping mechanisms in case of climate shocks. Due to limitations in the data, we do not include analysis on insurance and humanitarian cash transfers.

&nbsp;

&nbsp;

<img class="wp-image-45786 aligncenter" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2023/02/combined_chart.png" alt="" width="901" height="1186" />

&nbsp;

There is a lot we can unpack from the figure above. Here are some takeaways:
<h4>Mapping climate risks against access to financial services can be a valuable diagnostic tool to identify vulnerable countries.</h4>
The chart shows, for example, that people living in Afghanistan and South Sudan are the world’s most vulnerable to climate shocks because they are both the most affected by climate emergencies (on a per capita basis) and have the least access to financial services. Countries such as India, Burkina Faso, Mali, and Bangladesh are also at risk as their exposure to climate shocks is high and access to financial services is limited in large parts of their populations.
<h4>High penetration of digital payments indicates a potentially important role for solidarity networks.</h4>
Digital payments have relatively high levels of penetration in most countries. Kenya, Uganda, and Ghana, for example, have a penetration rate above 60 percent. Even Venezuela, which has extremely low access to formal savings and credit, has very high penetration of digital payments. On the other hand, countries like Pakistan, Afghanistan and South Sudan have very low penetration, hence internal remittances are likely to be slower and more expensive, making it more difficult for solidarity networks to be fast and efficient. Several studies have shown the importance of digital payments in contexts of shocks -- for example, the seminal work by <a href="https://www.aeaweb.org/articles?id=10.1257/aer.104.1.183" target="_blank" rel="noopener noreferrer">Jack and Suri</a> in Kenya on the role of MPesa, and in <a href="https://voxdev.org/topic/finance/mobile-money-changing-rural-landscape-evidence-mozambique" target="_blank" rel="noopener noreferrer">Mozambique,</a> mobile money was an essential coping mechanism during severe floods.
<h4>Savings and credit have limited penetration, with a few exceptions.</h4>
The data suggests that a majority of households do not have any savings in formal financial institutions. Countries such as Bangladesh, Venezuela, and Uzbekistan are particularly vulnerable, as their level of savings in formal institutions is extremely low, even lower than access to credit. Countries such as Kenya, Ukraine, and Uganda have relatively high access to both formal savings and credit, though the effectiveness of these services during shocks is not yet fully understood. Formal savings require a functioning and effective cash-in/cash-out network, which <a href="https://reliefweb.int/report/pakistan/pakistan-banks-close-64-branches-affected-areas" target="_blank" rel="noopener noreferrer">can be disrupted</a> in cases of climate shocks.
<h4>G2P payments are low in most countries.</h4>
With a few exceptions such as Indonesia and the Philippines, the level of government transfers is low. While Kenya has the highest levels of financial inclusion overall, it has few G2P payments, despite its high exposure to climate shocks. Countries such as Nigeria, Ghana, Tanzania, and Cameroon also have extremely low levels of G2P penetration, though the populations have been relatively less affected by climate shocks.
<h1>What next?</h1>
We have only scratched the surface in exploring the intersection of climate shocks and inclusive finance.  Much more research is needed if the inclusive finance industry is to fully understand and fulfil its role in building resilience in face of climate shocks. This analysis was based on publicly available historical data, which helps paint a general picture. But it excludes the impact of prolonged and gradual environmental stresses, which are expected to become more pronounced as climate change accelerates. Moreover, each country context is different, and the types of climate shocks they are subject to have very diverse implications. Extreme heat in India, for example, affects livelihoods very differently from floods or droughts in other countries.  And the role that financial services can play also differs from country to country.

Demand, however, for this work is accelerating. Humanitarian organizations are increasingly interested in understanding the role of financial services in responding to emergencies, especially given the frequency and scale of climate-driven shocks. Their efforts so far have largely focused on designing efficient cash transfer programs and working with local savings and loan associations to distribute the financial aid.  As humanitarian organizations focus more on building resilient market systems in the long term, the role of green inclusive finance can help them address emergencies at a market system level.

Exploring the Intersection of Climate Shocks and Financial Inclusion

FIW Recap: Women’s Financial Inclusion Remains Key Global Focus

The impacts of climate change are diverse and wide-ranging. Its most immediate manifestations, such as natural catastrophes and extreme weather events, sea level rise, damage to biodiversity, and communicable diseases, amplify the hardships on developing economies which are often more vulnerable to damage and have fewer resources available to support the recovery. The <a class="Hyperlink SCXW263472838 BCX0" href="https://globalrff.org/december-2022" target="_blank" rel="noreferrer noopener">December 2022 RFF</a> discussions explored the links between responsible finance and the challenges posed by climate change.
<h1>Preparedness, Risk Management, and Insurance</h1>
Along the lines of the three key themes of the December 2022 RFF convening – consumer protection, the role of stakeholders, and the path forward in the face of climate change – insurance has an important role. Insurance can strengthen the resilience of vulnerable communities and help them adapt to the climatic changes impacting their lives. If leveraged systematically for both transition and physical risks, it can contribute to the health of the entire financial sector.
<blockquote class="pullquote--left">If leveraged systematically for both transition and physical risks, insurance can contribute to the health of the entire financial sector.</blockquote>
The role of insurance supervision in this extraordinarily complex challenge is far-reaching and multifaceted. As the guardians of consumer protection and financial stability, enablers of innovation and market development, and policy influencers, supervisors are in a position to contribute to financial literacy efforts, establish standards and expectations for financial institutions, remove regulatory barriers for new or innovative solutions, assess risk management practices, support the efforts of the government bodies, and convene forward-looking multistakeholder initiatives. <a href="https://a2ii.org/en/home" target="_blank" rel="noopener noreferrer">Access to Insurance Initiative (A2ii)</a> has supported insurance supervisors in promoting the development of inclusive insurance markets in low- and middle-income countries, in the context of climate and disaster risk, among other key focus areas.

But strengthening the financial system’s resilience in the face of climate change requires systemic solutions and a comprehensive disaster risk management strategy. This can only be achieved through collaboration and innovative approaches from various stakeholders. Supervisory engagement with the industry players, for instance, develops an understanding of the practical challenges and regulatory barriers that providers face in bringing new products to consumers.
<h1>A2ii’s Work on Climate and Disaster Risk</h1>
In recognition of this, the A2ii launched the third <a href="https://a2ii.org/en/iii-lab" target="_blank" rel="noopener noreferrer">Inclusive Insurance Innovation Lab</a> on climate – the first lab with a thematic focus. As part of the project, regulators and other key stakeholders of the insurance space (i.e., government representatives, the industry, distribution, and the nonprofit sector) convened in a year-long process of finding innovative approaches to closing the protection gap against climate change headwinds.

The selected country teams of Costa Rica, Grenada, Zambia, and Zimbabwe emerged from the lab process with the following:
<ol>
 	<li data-leveltext="%1." data-font="Calibri" data-listid="12" data-list-defn-props="{&quot;335552541&quot;:0,&quot;335559684&quot;:-1,&quot;335559685&quot;:1080,&quot;335559991&quot;:720,&quot;469769242&quot;:[65533,2],&quot;469777803&quot;:&quot;left&quot;,&quot;469777804&quot;:&quot;%1.&quot;,&quot;469777815&quot;:&quot;hybridMultilevel&quot;}" aria-setsize="-1" data-aria-posinset="1" data-aria-level="1">A web-based platform for small hoteliers providing risk assessments and sustainable solutions (Costa Rica)</li>
 	<li data-leveltext="%1." data-font="Calibri" data-listid="12" data-list-defn-props="{&quot;335552541&quot;:0,&quot;335559684&quot;:-1,&quot;335559685&quot;:1080,&quot;335559991&quot;:720,&quot;469769242&quot;:[65533,2],&quot;469777803&quot;:&quot;left&quot;,&quot;469777804&quot;:&quot;%1.&quot;,&quot;469777815&quot;:&quot;hybridMultilevel&quot;}" aria-setsize="-1" data-aria-posinset="1" data-aria-level="1">A mutual risk pool providing direct relief to farmers and fisherfolk after a climate-related disaster (Grenada)</li>
 	<li data-leveltext="%1." data-font="Calibri" data-listid="12" data-list-defn-props="{&quot;335552541&quot;:0,&quot;335559684&quot;:-1,&quot;335559685&quot;:1080,&quot;335559991&quot;:720,&quot;469769242&quot;:[65533,2],&quot;469777803&quot;:&quot;left&quot;,&quot;469777804&quot;:&quot;%1.&quot;,&quot;469777815&quot;:&quot;hybridMultilevel&quot;}" aria-setsize="-1" data-aria-posinset="1" data-aria-level="1">An awareness-raising campaign for agriculture stakeholders jointly with community champions (Zambia)</li>
 	<li data-leveltext="%1." data-font="Calibri" data-listid="12" data-list-defn-props="{&quot;335552541&quot;:0,&quot;335559684&quot;:-1,&quot;335559685&quot;:1080,&quot;335559991&quot;:720,&quot;469769242&quot;:[65533,2],&quot;469777803&quot;:&quot;left&quot;,&quot;469777804&quot;:&quot;%1.&quot;,&quot;469777815&quot;:&quot;hybridMultilevel&quot;}" aria-setsize="-1" data-aria-posinset="1" data-aria-level="1">A bundled product – the Farmer’s Basket – offering Affordable Area Yield Index Insurance with inputs like pesticides, fertilizers, and irrigation equipment (Zimbabwe)</li>
</ol>
On the capacity-building side, <a href="https://connect.a2ii.org/" target="_blank" rel="noopener noreferrer">Connect.A2ii</a>, A2ii’s learning and exchange platform for supervisors, offers trainings on the topic.
<ul>
 	<li data-leveltext="" data-font="Symbol" data-listid="11" data-list-defn-props="{&quot;335552541&quot;:1,&quot;335559684&quot;:-2,&quot;335559685&quot;:720,&quot;335559991&quot;:360,&quot;469769226&quot;:&quot;Symbol&quot;,&quot;469769242&quot;:[8226],&quot;469777803&quot;:&quot;left&quot;,&quot;469777804&quot;:&quot;&quot;,&quot;469777815&quot;:&quot;hybridMultilevel&quot;}" aria-setsize="-1" data-aria-posinset="1" data-aria-level="1">The <a href="https://connect.a2ii.org/supervision-of-climate-related-risks-in-the-insurance-sector" target="_blank" rel="noopener noreferrer">Supervision of Climate-Related Risks in the Insurance Sector</a> training is based on the <a href="https://www.sustainableinsuranceforum.org/publication/application-paper-on-the-supervision-of-climate-related-risks-in-the-insurance-sector/" target="_blank" rel="noopener noreferrer">joint IAIS-SIF Application Paper</a>. The training module includes recommendations for supervisors on five key areas: i. supervisory review and reporting; ii. corporate governance, risk management and internal controls; iii. enterprise risk management for solvency purposes; iv. investments; and v. disclosures.</li>
 	<li data-leveltext="" data-font="Symbol" data-listid="11" data-list-defn-props="{&quot;335552541&quot;:1,&quot;335559684&quot;:-2,&quot;335559685&quot;:720,&quot;335559991&quot;:360,&quot;469769226&quot;:&quot;Symbol&quot;,&quot;469769242&quot;:[8226],&quot;469777803&quot;:&quot;left&quot;,&quot;469777804&quot;:&quot;&quot;,&quot;469777815&quot;:&quot;hybridMultilevel&quot;}" aria-setsize="-1" data-aria-posinset="2" data-aria-level="1"><a href="https://a2ii.org/en/event/inclusive-insurance-training" target="_blank" rel="noopener noreferrer">The Inclusive Insurance Training</a> is delivered multiple times per year in English, Spanish, and French and features an important foundational climate and environmental risk module. The module is designed to provide insight into the nature and effects of climate risks on insurers, economies, and consumers, with a focus on inclusive insurance markets. It also explores the role of financial institutions and the role of the supervisor.</li>
</ul>
Index insurance is undoubtedly on the path forward in the face of climate change. However, in emerging markets globally, regulatory frameworks are adapting cautiously with solutions coming from the industry. Supervisory capacity-building, information, and peer exchange on how to regulate and encourage the development of responsible and sustainable index-based solutions are critical.
<blockquote class="pullquote--right">Supervisory capacity-building, information, and peer exchange on how to regulate and encourage the development of responsible and sustainable index-based solutions are critical.</blockquote>
Looking to support supervisors in understanding the mechanics of index insurance, A2ii has recently partnered with the UNCDF Pacific Insurance and Climate Adaptation Programme (PICAP) to publish a <a href="https://a2ii.org/en/knowledge-center/index-insurance/joint-publication-on-index-insurance-best-practices-for-insurance-regulators-and-practitioners-in-the-pacific-island-countries" target="_blank" rel="noopener noreferrer">best practices report on index insurance</a>, sourcing from the Pacific Island countries. The publication provides valuable insight for the region and beyond and guidance on enabling regulatory frameworks to develop index insurance.

Additionally, the upcoming <a href="https://a2ii.org/en/event/public-dialogues/index-insurance-public-dialogue" target="_blank" rel="noopener noreferrer">A2ii-IAIS Public Dialogue – Index Insurance Best Practices</a> will provide a platform to meet and discuss key insights from the report, including regulatory guidelines for index insurance solutions.

In conclusion, supervisors are increasingly recognizing the importance of addressing climate change impacts as well as the emerging opportunities arising from the challenge. Doing things differently will require building new partnerships for novel products and business models, aligning regulation and technology to be hand-in-hand. The goal is to build more robust insurance value chain ecosystems and resilient communities. A2ii is committed to accompanying supervisors on this learning journey through future capacity building, multistakeholder initiatives, knowledge generation, and dialogue.

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A2ii is a unique global partnership working to ensure that the excluded and underserved have access to insurance, allowing them to take control of their lives and reduce their vulnerability against risks. A2ii supports insurance supervisors and regulators in creating the conditions necessary for an inclusive insurance market to grow.

A2ii is the 'implementation arm' of the International Association of Insurance Supervisors (IAIS) on Inclusive Insurance.

Envisioning Responsible Finance in the Context of Climate Change – the Role of Insurance Supervision

Report

APIs are often viewed as potential solutions for traditional financial institutions, particularly small and midsize banks, to partner with upstart financial technology companies (fintechs) to offer innovate products, especially to low-income customers. In practice, however, due to the maturity of the fintech market, fear of losing competitive advantage, and a variety of strategic errors in planning for and developing APIs, smaller banks and fintechs do not often succeed in deploying API solutions for inclusive finance.  

In this report, based on nearly two dozen interviews with leaders at fintech companies, small and midsize banks, and large financial institutions, CFI Fellow <a href="/bio/dan-kleinbaum">Dan Kleinbaum</a>, examines the extent to which APIs are meeting their potential to facilitate bank and fintech partnerships that advance financial inclusion. Dan breaks down what API integrations between banks and fintechs look like and how typical deployments work. Finally, he offers four recommendations for how to improve API deployments between banks and fintechs to deliver financial services to underserved communities.
<h2>A Typology of APIs</h2>
It is useful for leaders at financial institutions to understand the types of APIs common in financial services. For examples, in API aggregator and platform models shown below, a third-party provides APIs on behalf of financial institutions to institutional customers (e.g., fintechs) in its network. The aggregator or platform may also provide sales, marketing, onboarding and other services. We also explore open and private API models in the report.
<h3>API Aggregator and Platform Models</h3>
<img class="size-large wp-image-37835" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2020/03/CFI55_API_deployments_FINAL-fig05_graphic-LOGO-1024x596.jpg" alt="API Aggregator and Platform Models" width="1024" height="596" />

API Deployments in Inclusive Finance

Mobile phones and networks are transforming the world of finance, creating opportunities  for widespread financial inclusion, especially among neglected regions and groups. Security and privacy should be among the most important considerations when building digital finance systems.
Credit decisions are often based on sensitive information and online finance offerings are no exception. The sensitivity of this information gives rise to a series of critical questions for customers:
<ul>
 	<li>To whom am I giving my data? And who else do they allow to access it? For what purposes?</li>
 	<li>How do the companies protect data so that people who do not have legitimate access cannot use or steal it?</li>
 	<li>What rights and options do I have if something does go wrong?</li>
</ul>
The goal of this research, conducted by CFI Fellow Patrick Traynor, is to examine how well digital lenders are responding to these questions.

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Digital Finance and Data Security

All over the world, small loans to individuals and very small businesses are increasingly made using digital channels, whether online, via a mobile device or through an agent. However, trust, confidence and responsible lending practices need to be in place to ensure this industry is successful and its customers are protected and empowered.

In <a href="storage/Responsible_Digital_Credit_FINAL_2018.07.18.pdf">Responsible Digital Credit</a>, CFI Fellow John Owens outlines the digital credit landscape and the risks customers face, and examines the best practices, standards and initiatives that exist or should be implemented to improve consumer protection in digital lending. Ultimately, John argues, it will take a village to ensure that digital credit clients are protected—including govenrments, regulators, industry players, advocates and consumers themsleves. He sees three key activities: 1) industry self-regulation, 2) certification of digital credit providers, and 3) directly empowering consumers, as key to the future of what responsible digital credit looks like.

This report is published jointly with the <a href="http://www.smartcampaign.org/">Smart Campaign</a> and was made possible by support from Mastercard Foundation and other partners.

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Responsible Digital Credit

CFI Fellow <a href="/programs-a-projects/cfi-fellows-program/782#AlexisBio">Alexis Beggs Olsen</a> investigates Kenya’s digital financial services (DFS) landscape, the reasons why customers still desire human touch, and the innovative ways in which FSPs integrate human interfaces into their digital product offerings to better serve customers. In Uniting Tech and Touch: Why Centaur Products Are Better for Consumers and Providers, Evidence from Kenya, Alexis takes us along the customer journeys of Kenyan DFS users to illuminate the circumstances where they prefer human touch, the variations in customer preferences across demographic characteristics, and the particular pain points of low-touch digital loans, savings and insurance products.

Alexis finds that although Kenyans are comfortable conducting transactions digitally, other key aspects of the financial service customer journey are not adequately handled by digital means alone. Based on 104 in-depth qualitative interviews, Alexis discovers that Kenyans particularly want human touch for three reasons:

1. To verify the legitimacy of the FSP
2. To fully understand the product
3. To resolve problems or complaints

To address these needs, Alexis recommends “centaur” solutions—ones that combine human and digital interfaces—to provide valuable human interaction to customers where it is needed most, while improving customer acquisition and retention in the process. FSPs, their customers, and the financial inclusion community can benefit from leveraging centaur solutions that combine the best of tech and touch to convert customers who are currently uncomfortable with these digital interfaces into regular digital financial services users.

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<img class="alignnone size-large wp-image-29309" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2017/04/Technology-Inequality-Inforgraphic-330x1024.png" alt="" width="330" height="1024" />

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Uniting Tech and Touch: Why Centaur Products Are Better for Consumers and Providers - Evidence from Kenya

CFI Fellows <a href="programs-a-projects/cfi-fellows-program/781#MishaBio">Misha Sharma</a> and <a href="programs-a-projects/cfi-fellows-program/781#ShreyaBio">Shreya Chatterjee</a> evaluate the factors currently shaping the adoption of digital financial services by emerging consumers in India and assess the crucial role that frontline banking agents play in helping to successfully transition their clients to digital platforms. The authors find that despite significant progress toward digital financial inclusion in India, agents still matter for bringing low-income consumers into the digital fold. Specifically, while agents largely assist with product adoption and use, their value to the financial sector and the financial institutions they represent goes beyond these responsibilities—they are the key to building trust, resolving problems, and ensuring value for customers. The report also articulates the state of agent practice in India and outlines 10 principal insights on training, equipping, and promoting financial product awareness among agents within the three types of assessed institutions—commercial banks, payment banks and microfinance institutions (MFIs).

In their evaluation of agent effectiveness in India, Misha and Shreya consider the following criteria:
<ul>
 	<li>Adequate Resources. Do agents have sufficient technical, financial, and administrative resources?</li>
 	<li>Awareness and Knowledge About Digital Financial Services. Do agents have the knowledge to make customers aware of the existence and uses of digital products, and build trust in the process?</li>
 	<li>Motivation. Are agents willing and motivated to spend the time needed to promote awareness and assist customers?</li>
</ul>
These factors—resources, knowledge, and motivation—ensure that agents can effectively assist novice digital financial services customers and convert them into habitual users, and are therefore clear priorities for the financial services providers the agents represent. The authors find that the degree of resource availability differs by institution type and affects the agents' ability to assist customers with digital financial services in various ways. Ultimately, the authors find that business correspondent agents have the right combination of resources, knowledge, and motivation to help customers transition to digital financial services; credit officers (the "agents" of MFIs) are well-positioned to influence their customers once MFIs avail these services; and payment bank agents are least able to influence their clients to adopt or use digital financial services.

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Agents of Change: How the Human Touch Is Bringing Digital Financial Services to New Customers in India

In this report, CFI Fellow <a href="programs-a-projects/cfi-fellows-program/784#JustynaBio">Justyna Pytkowska</a> outlines six strategies that microfinance institutions across Europe and Central Asia use to deploy financial capability interventions, and evaluates whether these institutions successfully integrate and sustainably fund these programs within their core lines of business:
<ol>
 	<li>Income From Fees, Services or Materials</li>
 	<li>Grants and Subsidies</li>
 	<li>Absorption Into Marketing or Corporate Social Responsibility Budgets</li>
 	<li>Integration Into Credit Processes and Routine Client Interactions</li>
 	<li>Cost-Sharing Through Partnerships</li>
 	<li>Use of Volunteers</li>
</ol>
This report unpacks these findings and highlights their implications for other organizations interested in developing their own financial capability programs for the benefit of microfinance clients around the world.

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Delivering Financial Capability: A Look at Business Approaches

In this research, Guy Stuart, CFI Fellow and Executive Director of Microfinance Opportunities, assesses whether and how G2P payments increase formal financial inclusion. Stuart coupled observations, interviews and focus groups in Colombia and Pakistan with extensive analysis of reports on G2P payments covering 19 countries and quantitative data from the World Bank Global Findex.

While Stuart’s research identifies five key mechanisms by which G2P payments could lead to greater financial inclusion, the evidence ultimately suggests that G2P beneficiaries do not take advantage of the basic and common functionality of these programs.

Stuart provides insightful recommendations for government and the private sector to design better products, optimize delivery of payments, and effectively communicate the advantages of these programs to beneficiaries.

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Government to Person Transfers

In this report, Christy Stickney, CFI Fellow and independent consultant, highlights the characteristics of owners of small and medium-sized enterprises (SMEs) whose businesses have overcome significant hurdles and grown from their micro size.

Christy has utilized qualitative research to identify and analyze clients of MFIs whose borrowing had increased significantly over time from the portfolios of three leading microfinance institutions in Latin America – MiBanco (Peru), Banco Solidario (Ecuador), and Banco ADOPEM (the Dominican Republic). As part of the research, Christy conducted 55 in-depth client interviews and consulted with institution staff. She identifies and describes in detail a select group of "growth entrepreneurs" (GEs) who operate higher growth businesses, have overcome significant growth hurdles, and express a clear vision for future business growth. Christy argues that this category of emerging SMEs holds great potential for future growth and job creation.

Christy also provides recommendations for financial institutions (including microfinance institutions [MFIs]), FinTech companies, governments, and other financial ecosystem actors to support growth and greater financial inclusion for emerging SMEs and growth entrepreneurs.

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Emerging SMEs—Secrets to Growth from Micro to Small Enterprise

Since the debut of mobile financial services (MFS) 10 years ago, the sector is now preparing for a switch to smartphones that will enable even more and better services. Not so fast, cautions CFI Fellow Leon Perlman.

In his report, Technology Inequality: Opportunities and Challenges for Mobile Financial Services, Perlman steers readers through a primer on the technology that enables MFS to operate on basic, feature and smart phones. But more importantly, the report sounds a cautionary note about the readiness of the sector for a large-scale shift to smartphone and internet-based MFS, particularly for low-end consumers. Leon's on-the-ground research conducted in 12 different countries finds that smartphone-enabled MFS is not an impending panacea for financial inclusion. Due to the slow spread of reliable, high-quality 3G coverage and sufficiently capable smartphones, the majority of MFS will be accessed on feature phones, using Unstructured Supplementary Service Data (USSD), SIM Application Toolkit (STK) and java-applets, rather than internet-enabled smartphones, for the forseeable future.

This report urges regulators and technology providers to continue supporting MFS based on feature phones, even as they work to create paths for new-generation services. While smartphones promise more intuitive and richer user interfaces, this promise will take some time to materialize fully and robustly. If mobile financial services are to be a force for financial inclusion, we must not prematurely abandon older technologies as we concurrently push to create a smartphone-based future.
<h2><img class="size-large wp-image-29309 alignright" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2017/04/Technology-Inequality-Inforgraphic-330x1024.png" alt="" width="330" height="1024" />Major Findings</h2>
<ul>
 	<li>For MFS to continue to grow, it is important to continue supporting feature phones with USSD and STK interfaces.
MFS, for people at the base of the economic pyramid (BoP), are currently provided largely on feature phones operating across 2G mobile networks and using menu-driven, text-based user interfaces. The main technologies facilitating MFS here are Unstructured Supplementary Service Data (USSD),Short Message Service (SMS) in its SIM Application Toolkit (STK) incarnation, and Java applets.Feature phones are likely to dominate MFS for BoP for the foreseeable future. While smartphones are penetrating BoP markets, the pace remains relatively slow. Additonally, feature phone manufacturing is actually growing. As early mobile technology patents expire, feature phone costs will continue to drop and use will grow.</li>
 	<li>Realizing the promise of smartphones for MFS first requires improving their technical specifications and the presence of high-speed networks. Cheap smartphones are not yet sophisticated enough to support MFS. Gaps in high-speed 3G mobile data coverage persist, especially in MFS-focused rural and peri-urban areas. Where there is no 3G coverage, there is usually no 4G coverage either. While 3G (and 4G) coverage is predominant in urban areas and along major highways, rural areas still receive mainly 2G coverage.</li>
 	<li>Costs, for both customers and providers, are the source of many of constraints to smartphone MFS adoption. Data costs for data-hungry smartphones may be prohibitive for many BoP users. Manufacturers produce less sophisticated phones to keep prices affordable for the mass market. Mobile network operators (MNOs) face high costs for acquiring spectrum and building infrastructure in rural areas in order to expand and upgrade service.</li>
 	<li>Security vulnerabilities on MFS channels and devices put customer transactions and MFS systems at risk. The 1970s-era Signaling System 7 (SS7) technology that enables mobile phone (and landline) communications is not secure and has been exploited by bad actors for decades. The standard mobile air platform is susceptible to relatively cheap, homemade devices performing “man-in-the-middle” interception of mobile voice, SMS and data traffic. Counterfeit and stolen phone sales are increasing and  some MFS smartphone apps are designed with insufficient security. On the brighter side, MFS apps on feature phones and written in Java mostly use encrypted SMS, so they could provide a secure and ubiquitous means of transacting.</li>
 	<li>Policy makers must address competition issues for MFS systems. Access to service gateways should be fair, reasonable and non-discriminatory. MNOs may be gatekeepers for access to services and infrastructure for competing MFS providers. Those competing service providers may be handicapped (“foreclosed”) by being denied access to USSD or STK gateways and short codes or through prohibitive pricing. Also, MNOs and non-bank service providers may be denied access to payment infrastructures required to interoperate or provide services such as merchant acceptance or ATM withdrawals. Thin SIM technology is being implemented in several countries as a technical fix to evade such blockages.</li>
</ul>
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Technology Inequality: Opportunities and Challenges for Mobile Financial Services

Blog Posts by Fellows

Dan Kleinbaum

Application program interfaces (APIs) are a set of defined methods and functions that allow one computer program to “talk” to another program to consume data, perform actions, or both. APIs generally reduce the complexity of accessing technology systems and automate the interaction between systems and apps in ways that are seamless and unseen to the consumer.
<blockquote>APIs are a set of defined methods and functions that allow one computer program to “talk” to another program to consume data, perform actions, or both.</blockquote>
Greg Walker of 18F explains APIs by analogy to <a href="https://18f.gsa.gov/2016/04/22/what-is-an-api/">grocery stores</a>, which easily connect thousands of shoppers to thousands of food producers. “You [know to] go to the produce section for bananas, not the dairy aisle. You don’t have to know how to grow bananas, how to harvest them, or how to ship them; you only need to know that you want them. The store ‘hides’ the how so you can focus on what matters to you – getting some food.”
APIs act as a catalyst for a variety of services, including some examples that promote financial inclusion. For example, <a href="http://textteller.com/">Teller</a>, a DFS Lab portfolio company uses APIs to connect cost-effectively with customers. Teller offers AI-powered financial literacy training, customer onboarding, and customer support for digital financial service providers. Teller is behind some of the largest deployments of <a href="https://www.mtn.com/mtn-group-launches-africas-first-artificial-intelligence-service-for-mobile-money/">chatbots in emerging markets</a>. A key enabler for their multi-platform chatbot are APIs that enable Teller to access messaging services like SMS and WhatsApp and voice via IVR to reach customers. APIs to these services are provided by companies like Twilio and <a href="http://www.turn.io/">Turn</a>.

Generally speaking, financial institutions offering APIs utilize one of three methods:
<h2>1) Open APIs</h2>
Open APIs are designed for general, repeatable use and openly accessible to third parties.
Twilio and Turn are open APIs for communication. Open APIs offer access to functional systems and, ideally can be accessed purely online, with no human interaction. To encourage uptake of open APIs, providers often offer free sandbox testing or freemium pricing allowing developers to start using the service free to get a sense of how the APIs function and whether they work with the developers’ products. Readily available documentation, standardized onboarding and KYC documentation processes, sandboxes and other aspects of the delivery in open APIs are designed for repeatability.
<blockquote>Open APIs are designed for general, repeatable use and openly accessible to third parties.</blockquote>
A financial institution planning to offer open APIs embarks <a href="https://medium.com/abn-amro-developer/open-banking-the-api-journey-continues-ce889931d9eb">on a journey</a> that can require significant upfront investment of time and resources and may come <a href="https://www.cgap.org/blog/avoiding-common-pitfalls-along-journey-open-apis">with some risk</a>. This is especially true when converting from complex legacy IT and core banking systems which were not initially designed to be accessed via API. Moreover, there are often significant security requirements and regulatory hurdles that must be considered.
Despite these barriers, more and more financial service providers are opening APIs. MTN Uganda invested $400,000 to <a href="https://www.cgap.org/blog/mtn-uganda-opens-mobile-money-apis">open their mobile money API</a>. Equity Bank in Kenya has invested upwards of <a href="https://www.bloomberg.com/news/articles/2018-10-14/equity-group-sees-22-million-fintech-unit-revenue-in-first-year">$10 million in Finserve</a> – a subsidiary to offer a suite of open transactional, KYC and account APIs – and NedBank in South Africa <a href="https://apim.nedbank.co.za/blog/nedbank-digital-innovation-scores-african-first">invested over $138 million to incorporate APIs</a> as part of a massive technology overhaul across the bank. Justifying the investment, long run benefits can include higher deposits, transaction volumes and revenue, resulting from an ecosystem of partners who also benefit from lower costs of integration and better service delivery through open infrastructure.
<h2>2) Private APIs</h2>
Private APIs are created to grant access to a specific party or parties.
Private APIs are designed to enable financial institutions to allow specific internal or external, pre-authorized parties access to certain functionality, based on predetermined requirements. Often, a discreet business or use case dictates the development of a private API and, consequently, the major distinguishing feature of private APIs is a lack of repeatability.
<blockquote>Private APIs are created to grant access to a specific party or parties.</blockquote>
An example comes from <a href="https://www.xendit.co/">Xendit</a>, a payment processor in Indonesia, which was founded to build the “<a href="https://www.youtube.com/watch?v=_0rgx8gN6cQ">Venmo for Indonesia</a>.” After succeeding with peer-to-peer payments, Xendit saw demand for customer-to-bank transfers. Xendit collaborated with a mid-sized bank which, as a regulated financial institution, can process payments to any other bank in Indonesia. The bank partner developed a transactional API for Xendit that enables the service to make instant transfers to any bank in Indonesia from an escrow account held by Xendit at the bank. On that foundation, Xendit built an expanded set of products, including payroll payments and invoices, has successfully onboarded a large number of customers, and built a viable business. For the partner bank, the Xendit relationship has significantly increased its total deposits.
<h2>3) API Marketplaces</h2>
API marketplaces are offered by third parties to other third parties.
API marketplaces are also operated by third parties, and offer APIs on behalf of any number financial institutions. API marketplaces aggregate documentation, KYC, and onboarding processes and try to get a critical mass of fintech innovators actively looking to develop solutions with participating financial institutions. By spreading the costs of constructing APIs among a larger number of participating FIs, marketplaces can lower the costs for participants. Examples of API marketplaces include <a href="https://www.finconecta.com/">FinConecta</a>, a global API marketplace, and the <a href="https://apixplatform.com/marketplace/aboutapix">APIX exchange</a> launched in the ASEAN region.
<blockquote>API marketplaces offered by third parties to other third parties.</blockquote>
The resources available and business goals tend to determine the delivery model chosen by a financial institution. Internally-owned, open APIs offer financial institutions the greatest flexibility to build a suite of API-based products that can enable a successful innovation ecosystem, but they require significant investments in technology and people to sell and support. In some cases, there may not be a need, or resources available, to open APIs, and a private API will suffice to work with a partner. Private APIs still requires technical development and internal capacity to build and sell.
API marketplaces, on the other hand, reduce the need to redo internal business structures and add internal capacity. However, initial interviews for my research indicate that given the lack of ownership over success metrics, in addition to regulatory barriers, more effort may be required to make these successful. I will investigate this in more detail as my research proceeds.

Regardless of how a particular financial institution implements APIs, technology alone will never be enough to successfully build partnerships using APIs. Thinking of APIs as products inevitably leads to considering complementary business units, which can be the difference between success or failure. The gold standard comes from Amazon Web Services, Twilio and Stripe – three companies that have been extraordinarily successful in building and selling APIs. They have separate departments for a set of services to adequately deliver APIs as a product: sales and marketing, technology, documentation, customer onboarding, and customer support. Successful API implementations need to think through each of these aspects, and <a href="https://www.cgap.org/blog/youve-opened-apisnow-what">having KPIs</a> attached to each function can lead to measurable results.
Financial institutions have regulatory approvals and core banking capabilities that are highly valuable in the market, while fintech innovators often have greater ability to iterate rapidly and develop new products for underserved or unproven customer segments. Creating partnerships between these two types of organizations <a href="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2018/08/IIF-CFI_FI-Fintech_Partnerships_Final.pdf">offers multiple opportunities</a> for bringing innovations to market. Increasingly, these partnerships are based on financial institutions productizing APIs and offering infrastructure for new products and services.

In the next blog post, we will share a few detailed case studies that highlight the various API models. The hope is that these real world examples and lessons learned will help financial institutions to better navigate APIs. Also, as more case studies emerge, they will begin to form an answer to a larger question: do APIs help promote financial inclusion? We’ll see.
All comments and suggestions are welcome! Keep a lookout in the coming weeks for my next blog post, which will preview my research report. Learn more about my research topic on my <a href="https://www.centerforfinancialinclusion.org/bio/dan-kleinbaum">bio page</a>.

Don’t know much about APIs? CFI Research Fellow Dan Kleinbaum describes them—including their main delivery types—and their potential for helping institutions reach the underserved.  

Fifty million years ago, in the Cambrian Era, the diversity of life on earth exploded, thanks to a perfect storm of microbial enablers and geologic conditions. Today, some observers think the world is witnessing a digital “<a href="https://www.economist.com/special-report/2014/01/16/a-cambrian-moment">Cambrian Moment</a>” because of a combination of highly connected people and easily accessible building blocks for digital services. The financial inclusion sector is poised to share in this Cambrian Moment, thanks to widespread mobile phones, mobile money adoption and other enablers of innovations that promote access for the underserved.

In this post, we look at one of those building blocks – a potential enabler for financial inclusion: application programming interfaces (APIs). We also discuss the different types of APIs and how financial institutions should think about their API strategies.

Building Innovation: APIs, Fintechs and Financial Institutions

Larry Reed

Financial institutions can build profitable relationships with social payment recipients by providing services that are better tailored to their needs, such as longer-term savings and emergency loans.

Can you help me find some positive deviants?

I guess I should explain the term first. I’m not talking about an optimistic misfit, or an affirming nonconformist, or a heavy metal band with uplifting lyrics. Instead I’m using one of <a href="https://positivedeviance.org/">my favorite terms</a> from behavioral science. Positive deviants are individuals or groups who find better solutions to problems than their peers, without having more resources or facing easier challenges than others.

A positive deviant is someone who succeeds when others are failing, a person who finds a way out when everyone else is stuck. The purpose of studying these deviations from the norm is to learn from the strategies of the positive deviants to see if others can adopt them and get similar results.

I recently was selected as a <a href="https://www.centerforfinancialinclusion.org/2019-cfi-fellows">CFI Research Fellow</a> to study positive deviance in the banking industry. Specifically I will be looking at banks that provide accounts for clients receiving social welfare payments from the government (G2P payments), seeking to find banks that invest in serving this client base.

In countries around the world, governments distribute regular cash payments to those living below the poverty line. Sometimes these payments come with conditions, like keeping the children in school and receiving regular medical checkups. Sometimes they come as part of a public works project. And sometimes they have no conditions at all.

<a href="https://publications.iadb.org/publications/english/document/How-Conditional-Cash-Transfers-Work.pdf">Studies</a> have shown that these payments, even when very small (US $20 to $50 per quarter), can help families move out of poverty by stabilizing incomes. In addition, these payments can <a href="http://www.fao.org/3/a-i5157e.pdf">reduce the intergenerational transfer of poverty</a> by increasing the chances that parents can afford to send their children to school so that they may have better job opportunities than was previously possible.

Years ago, governments made these payments in cash. That’s right, a big truck loaded with cash would pull up to a local government office and drop off a bundle of bills. Local officials would distribute this cash to those on the government social welfare rolls. As you can imagine, much of this money never made it to the right people.

Today, governments use a quicker and less leaky method. They set up bank accounts for each beneficiary and deposit the money directly in their account. Now, in most cases, these accounts serve as a mailbox for those receiving the payments—as soon as the money comes in, its owner will go to the bank or an ATM and withdraw the full amount.
<blockquote>Why don’t recipients of social welfare payments keep money in the bank?</blockquote>
Why don’t recipients keep any money in the bank? Research by Guy Stuart of Microfinance Opportunities, and a CFI Fellow, looked at this question from the demand side and <a href="https://www.centerforfinancialinclusion.org/government-to-person-transfers">found</a> that the people receiving these payments:
<ul>
 	<li>Don’t trust the banks – Why should they leave their money with rich people they don’t know when they can keep it at home?</li>
 	<li>Don’t know about other products and services the banks have that might be useful to them.</li>
 	<li>Don’t see any benefit to leaving money in their account – especially when getting the money out requires a long walk to a bank branch or ATM.</li>
</ul>
<a href="https://www.centerforfinancialinclusion.org/bio/larry-reed">My research</a> will look at the supply side of this challenge. I can make a business case for why banks should invest in this customer base as part of a long-term strategy for building profits. It goes like this:
<ul>
 	<li>Banks accounts tend to be very "sticky." (A UK <a href="https://www.theguardian.com/money/2013/sep/07/switching-banks-seven-day">study</a> that found that people there changed spouses more frequently than checking accounts.)</li>
 	<li>Governments disburse social payments to large numbers of people, essentially handing over a ready-made client base.</li>
 	<li>Banks that offer products and serve these clients well will earn their loyalty.</li>
 	<li>Over time, many of these people will move out of poverty and have <a href="https://www.womensworldbanking.org/insights-and-impact/women-mexico-digital-g2p-financial-inclusion/">more active accounts and larger balances</a>.</li>
 	<li>This gives the banks that offer these accounts a chance to acquire large numbers of customers long before their competitors become interested.</li>
</ul>
<h2>A Different Perspective on G2P Payment Customers</h2>
Unfortunately, most banks do not see it this way. Since the money does not stay in the bank very long, they don’t see a way to make money on these accounts. They will set them up if the government will pay the cost of operating them, but they don’t want to invest resources into this customer base. This means that they don’t offer the types of products that meet the needs of these customers and they don’t take the time to help their customers learn how to use their accounts. Lack of <a href="https://strategiccfo.com/customer-profitability/">customer profitability</a> becomes a self-fulfilling prophecy.

So, I'm on my search for positive deviants, looking for banks that go against the grain and see these customers as part of their strategy for generating profits over the long term. The key criteria for banks to qualify as positive deviants in this area are:
<ul>
 	<li>Actively pursuing clients receiving social welfare payments from the government</li>
 	<li>Developing products designed for the needs and aspirations of these clients</li>
 	<li>Helping their clients learn how to make the best use of these products</li>
 	<li>Showing results in clients using more banking services over time</li>
</ul>
One of the banks I will be visiting is BHD Leon Bank in the Dominican Republic. They have <a href="https://www.povertyactionlab.org/evaluation/leveraging-government-transfers-offer-low-risk-microcredit-dominican-republic">invested in serving people receiving social payments</a> through Progresando con Solidaridad (PROSOLI), the government’s primary anti-poverty program. PROSOLI organizes its payment recipients into savings groups. BHD Leon provides savings accounts for these recipients, with debit cards for the account holders. BHD Leon also provides accounts a range of financial services to the owners of colmados, the small convenience stores where most people shop. It has set these stores up as banking agents, so those receiving G2P payments can use their debit cards to purchase food and supplies while also making their deposit for their savings group. This drives more traffic to those stores that bank with BHD Leon. By seeing the G2P payment recipients as part of a larger financial ecosystem which includes savings groups and convenience stores, BHD Leon has found a way to provide neighborhood service to the PROSOLI recipients while also expanding its business with the owners of neighborhood stores.

So how about it, have you come across any banks that deviate from the norm in this way? If so, please let me know in the comments below.

Thanks for your help.

Have a listen to the <a href="https://www.centerforfinancialinclusion.org/webinar-meet-the-2019-cfi-research-fellows">CFI webinar</a> I recently participated in to learn more!

Searching for Positive Deviants

Eric  Hathaway

Tune In

CFI Research Fellow Patrick Traynor and Research Manager Pablo Anton-Diaz discuss findings of "Digital Finance and Data Security" with Eric Hathaway of “The Finance Frontier.”

When I launched my podcast, <a href="https://thefinancefrontier.com/">The Finance Frontier</a>, my goal was to talk with experts and trendsetters on emerging topics and developments in the world of finance. I quickly realized that there is a global explosion in the rise of fintech startups, and a common theme for many of these companies is offering access to financial products and services to the unbanked and underbanked. Fintech companies are growing in both number and value, and it’s because they are opening a door into financial opportunity for groups that didn’t previously have one.

There are differences in client security protocol. Some of these fintechs have secure back ends to ensure transactions are safe, others are a little less so. In the <a href="https://thefinancefrontier.com/?creative=298391899356&amp;keyword=finance%20frontier&amp;matchtype=e&amp;network=g&amp;device=c&amp;gclid=CjwKCAiAy-_iBRAaEiwAYhSlA-eLKkcIfjLxgPNbatn9VbQyup5wCW8sUHx81f89WGz5JJw5lnGL2xoC_3oQAvD_BwE">most recent episode</a> of The Finance Frontier, I sat down and chatted about this topic with <a href="https://content.centerforfinancialinclusion.org/people/patrick-traynor/">Patrick Traynor</a>, CFI Research Fellow Professor of Computer Science at the University of Florida, and <a href="https://content.centerforfinancialinclusion.org/people/pablo-anton-diaz/">Pablo Anton-Diaz</a>, CFI Research Manager.

We discussed what happens when the systems that are focused on expanding financial inclusion are poorly designed and executed, and talk through what new companies need to take into account as they break into the market.
<h2>Solving Access Problems with Fintech...</h2>
Much of this is fueled by the rise of mobile technology and its supporting infrastructure. In countries with emerging economies, EY recently found that <a href="https://www.ey.com/en_gl/banking-capital-markets/four-themes-driving-fintech-adoption-by-consumers">46 percent of consumers</a> are adopting some kind of fintech solution, with 84 percent of consumers aware of some kind of these services.

Much of this focuses on moving money, with payments and money transfers accounting for roughly 50 percent of the daily active customer use. Additional categories include insurance, savings, investments and financial planning.

This demand is not slowing down, and consumers continue to show their enthusiasm for fintech solutions. But there is growing concern among industry professionals that this may be moving too quickly.
<h2>...But Creating Problems, Too</h2>
In this <a href="https://thefinancefrontier.com/?creative=298391899356&amp;keyword=finance%20frontier&amp;matchtype=e&amp;network=g&amp;device=c&amp;gclid=CjwKCAiAy-_iBRAaEiwAYhSlA-eLKkcIfjLxgPNbatn9VbQyup5wCW8sUHx81f89WGz5JJw5lnGL2xoC_3oQAvD_BwE">podcast episode</a>, Anton-Diaz, Traynor and I talk about the excitement of fintechs. But we also talk about the very real challenges of consumer protection, data security and the changing nature of criminals who increasingly focus on stealing personal information.

In the CFI report “<a href="https://www.centerforfinancialinclusion.org/digital-finance-and-data-security-2">Digital Finance and Data Security</a>,” Traynor examined the security of more than 50 fintech solutions. He looked at the privacy policies and options for consumer recourse from companies providing fintech services, and the results were eye-opening: “We see a pretty widespread set of configurations and security standings and some of them are actually downright dangerous.” And as Anton-Diaz wrote in <a href="https://www.centerforfinancialinclusion.org/new-data-security-study-of-fintech-apps-highlights-vulnerabilities">this post</a> on the CFI Blog, “No company studied was perfect, some were good enough, and some had real vulnerabilities.”
<blockquote>“We see a pretty widespread set of configurations and security standings and some of them are actually downright dangerous.”</blockquote>
<h2>What Does the Future of Fintech Hold?</h2>
Despite some of the challenges that Traynor and his research team discovered, fintech does represent a bright future for people who truly need access to finance products and services. In the interview, we address data questions and planning that fintech companies need to consider, as well as baseline security assumptions that fintechs need to plan for the future around.
While security requirements will continue to evolve, groups like the CFI, as well as individuals like Anton-Diaz and Traynor, are shining a light on some of the gaps that companies have today.

“If we get this wrong, we risk having another generation being excluded from the global financial infrastructure and that would be a tragedy. But if we get it right, then this can be something that can be a real differentiator between these companies.” Traynor said.

Be sure to listen to this episode of The Finance Frontier for a full discussion about the findings of this research, as well as the efforts to work with companies with security risks.

Good Intentions, Bad Security: Podcast Episode Delves Into CFI Research on Data Security in Digital Finance

John Owens

In the era of digital credit, we need not just new laws, but also new mental models for responsible digital credit provision.

As digital credit providers have grown exponentially over the past few years, and as digital products and models have proliferated, so too have concerns around consumer protection. In the recently published report, <a href="http://www.centerforfinancialinclusion.org/publications-a-resources/browse-publications/1036-responsible-digital-credit">Responsible Digital Credit</a>, I argue that ensuring that digital credit customers receive responsible treatment requires more than enhanced consumer protection laws and regulations. It also requires strong commitment from the digital credit industry. Finally, it needs consumers who are empowered to play a more proactive role in managing their digital credit responsibly.

Over the past year, I have interviewed digital credit industry associations, credit providers and their third-party data analytic providers, regulators, policy makers, and various consumer protection leaders. Many of these groups are working to develop responsible digital lending principles. With their input, my report proposes a guiding framework for responsible digital lending.  The framework uses the Smart Campaign <a href="https://www.smartcampaign.org/about/smart-microfinance-and-the-client-protection-principles">Client Protection Principles</a> as a basis for grouping the issues. In addition, I propose an eighth principle: security and fraud protection.

Digital credit, and especially the use of mobile phones, significantly alters interactions between borrowers and lenders. Lenders utilizing the mobile channel to advertise, acquire and transact with customers must pay particular attention to the limitations of mobile interaction with customers and follow industry <a href="http://onlinelendersalliance.org/wp-content/uploads/2016/03/Best-Practices-2016-1.pdf">mobile best practices</a>. While many of the standard consumer protection practices continue to apply, new concerns, or more accurately, new faces on older concerns, have emerged. In this post, I want to highlight several of the considerations I found most important and relevant for the digital lending industry.
<h2>Responsible Algorithms</h2>
Many digital credit models rely on algorithms to process data about clients and make credit decisions. Because most lenders consider their algorithms proprietary, it is difficult for observers to know on what basis credit decisions are actually made. This opaque situation raises the spectre of discrimination. Attributes that are considered inappropriate bases for differentiation, such as religion, language, gender, or ethnic origin, are areas of particular concern with regard to algorithm-based lending practices. As highlighted by a Smart Campaign <a href="http://www.centerforfinancialinclusion.org/publications-a-resources/browse-publications/916-smart-brief-tiny-loans-big-questions">report</a>, while credit offers may differ based on risk analysis, such differentiation should be consistently applied, stated in advance, and made with the goal of benefitting clients. To prevent discriminatory digital credit practices, some recommendations include:
<ul>
 	<li><a href="https://www.whitecase.com/publications/insight/algorithms-and-bias-what-lenders-need-know">Pretest, test and retest for potential bias</a>. Digital credit providers and third-party data analytics providers should continuously monitor the outcomes of their algorithmic programs to identify potential problems. Such testing could involve running scenarios to identify unwanted outcomes and developing and building controls that prevent adverse outcomes.</li>
 	<li><a href="http://www.ijmo.org/papers/43-A10212.pdf">Document the rationale for algorithmic features</a>. Digital credit providers should be able to provide visualization and a decision tree for the factors their algorithms analyze, as well as the justification for relying on these factors. The rationale should address how borrower debt capacity is assessed, given the importance of this concept in traditional underwriting.</li>
 	<li>Independent review of companies' proposed data sets and/or algorithms.</li>
</ul>
A self-regulatory approach could be used to develop best practices guidelines for data inputs and the development of nondiscriminatory artificial intelligence systems, following the model that has been successful for the Payment Card Industry Security Standards Council.
<h2>Indebtedness Monitoring</h2>
Because digital lending is often based on non-traditional underwriting criteria, to prevent over-indebtedness among digital borrowers it may be relatively more important to monitor outcomes at the portfolio level. Some of the ways to do this include:
<ul>
 	<li>Avoidance of debt traps by ensuring that clients are not forced into automated repeat loans.</li>
 	<li><a href="http://www.responsiblebusinesslending.org/">Responsible credit reporting</a> – Better compliance with reporting strengthens markets and leads to better client protection practices.</li>
 	<li><a href="http://www.centerforfinancialinclusion.org/storage/documents/Smart_Brief_Tiny_Loans_Big_Questions_Final_092617.pdf">Monitoring digital credit provider’s portfolio quality</a> – Industry benchmarks for portfolio quality can help to advance the understanding of risks and avoid business models that rely for their success on high default rates.</li>
</ul>
<h2>Digital Transparency </h2>
Digital credit platforms allow for 24/7 communications with clients that, if harnessed properly, can assist them with immediate technical support, remind them about upcoming payments and even identify counselors or resources for clients in financial stress. However, when communication is totally digital, there are heightened concerns about ensuring that clients really know what they are signing up for. Disclosure must lead to client understanding. Borrower disclosure standards should address:
<ul>
 	<li>Standards for honest advertising and penalties for misleading marketing materials of credit products. Furthermore, providers should advertise the name of the financial regulator they report to in all advertising materials.</li>
 	<li>Readability and format – Disclosures need to be easy to comprehend, available in the customer’s local language, and provided in print and digital formats.</li>
 	<li>Comparative tools – Standard summary disclosure documents would allow borrowers to compare credit offers, both digital and traditional.</li>
 	<li>Adequate notice periods – Consumers should be notified in advance of changes to interest rates, fees or terms and conditions.</li>
</ul>
A somewhat different but related and relevant concern, often overlooked in this context, is the vulnerability of individual investors who put their money into pure peer-to-peer (P2P) lending platforms. Protections need to be extended to them as well, with a focus on ensuring that they receive the information they need to evaluate risks and that they have recourse channels when something goes amiss.
<h2>Data Privacy and Usage Standards</h2>
While many regulators and most industry groups agree that it is important to protect the confidentiality and security of customers’ information, data use and the level of disclosure about its use are challenging topics. In the <a href="http://ec.europa.eu/justice/data-protection/reform/index_en.htm">EU</a> and in countries such as <a href="https://www.pc.gov.au/inquiries/completed/data-access/thedraft">Australia</a>, regulators are enacting rules mandating that individuals be notified about the use of their personal data and allowed to opt out. Opt-out rules should be considered as a potential requirement for all digital credit providers, especially in markets where mobile push-marketing has become problematic.

Over the next several years it will be important for laws or regulations to be put in place to protect consumer data privacy and guide information sharing. The rules need to:
<ul>
 	<li>Provide for informed consent, such that customers explicitly permit electronic data collection prior to its collection and use, and are given the option to consent or not.</li>
 	<li>Require providers to have a clear data collection and handling policy which limits the amount of data collected as well as the timeframe it is stored.</li>
 	<li>Inform clients about their data trails and credit histories, including the ability to ensure accuracy and correct for any errors or discrepancies.</li>
 	<li>Give regulators the power to discipline providers who repeatedly allow personal data to be misused.</li>
</ul>
<h2>Fraud Prevention and Security </h2>
New security vulnerabilities arising from digital credit strongly point to fraud and cyber-security as consumer protection concerns. It is increasingly urgent for digital credit providers to adopt standard security compliance measures and then to regularly test and update them. Providers must also be responsible for ensuring that the third-parties they use, including lead generators, brokers, agents, and data analytics providers, also have adequate security in place. Ultimately, providers need to be responsible for the actions of their third-parties (e.g., agents, contractors, lead generators, brokers and collectors).

Consumers should be made aware of the potential for fraud and encouraged to report suspected fraud cases or security breaches. Consumer awareness campaigns on the most common incidents of fraud (via the internet, SMS alerts, signage at agent kiosks, etc.) can help with this.

While the recommendations just listed do not apply in all markets, they do point to the urgent need for regulators, industry bodies, individual providers and consumers to work together to construct the ground rules for responsible digital credit that will ensure that consumers are adequately protected.

Editor's Note: This research was made possible by support from Mastercard Foundation and other partners.

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A Framework for Responsible Digital Credit

Shreya Chatterjee

Misha Sharma

New report from CFI Fellows Program on effective agent banking

<a href="http://www.centerforfinancialinclusion.org/programs-a-projects/cfi-fellows-program/781"><img class="wp-image-24797 alignright" style="border: 0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2017/12/agents-of-change.png" alt="" width="280" height="361" /></a>India’s financial services industry is poised for a digital revolution. From payment banks to India Stack to the recent expansion of mobile financial services, policy makers and financial service providers are energetically pursuing digitization of financial services. But the country still has a tremendous way to go. <a href="http://finclusion.org/country/asia/india.html">Roughly half the population</a> has low digital literacy, and adoption of digital financial services (DFS) is skewed towards higher income population segments. For example, only <a href="http://www.pewglobal.org/respondents/india/">9 percent</a> of those with lower education levels are online, as compared to 38 percent for those with higher education levels.

As <a href="http://www.centerforfinancialinclusion.org/programs-a-projects/cfi-fellows-program">CFI Fellows</a>, we explored how frontline banking agents can advance the adoption of DFS by helping first-time DFS users become comfortable transacting in new ways. We evaluated the factors currently shaping the adoption of DFS by emerging consumers in India and assessed how well agents are playing their crucial role in helping customers successfully transition to digital platforms.

In the <a href="https://cfi-blog.org/2017/01/18/what-does-effective-human-touch-look-like-in-indias-digital-age/">blog post</a> we wrote at the outset of our project, we pointed out that there are benefits and drawbacks to deploying human touch in digital financial services, and that an optimal mix of human and technology-enabled customer touchpoints needs to be achieved. Over-reliance on banking agents could cause overdependence on the part of customers, possibly eliminating potential cost savings unlocked by technology. But banking agents may also present great benefits, including in assisting with product adoption, facilitating transactions, resolving problems, building trust, and supporting customers’ transitions to more advanced services.

However, not all agent banking services are created equal, and in India we observe a wide range of models in action. In our research we studied three types of agents, each with a different profile and relationship to their parent organization. We wanted to answer these questions:

<ul>
 	<li>Do agents have sufficient technical, financial and administrative resources?</li>
 	<li>Do agents have awareness and knowledge about the range of products and services offered in the digital financial space?</li>
 	<li>Are agents motivated (via monetary compensation or otherwise) to spend the time needed to promote awareness of DFS among customers and assist them in their DFS transition?</li>
</ul>
Commercial Banks and Business Correspondents: Since 2006, commercial banks have been allowed to use third-party, non-bank individuals, known as business correspondents (BCs), to extend financial services. BCs perform a variety of functions on behalf of banks, such as opening accounts, facilitating withdrawals and deposits, introducing the customer to financial products, and providing other payment services. BCs enable banks to provide services in remote locations at a low cost.

Payment Banks and Payment Bank Agents: The Reserve Bank of India (RBI) issued the first “payment bank” licenses in February 2015. Payment banks function like any other bank, except that they do not advance loans, and therefore they operate free of credit risk. They can, however, accept deposits of up to US$1,500 per customer, offer remittance services, issue debit cards and mobile banking services, and facilitate transfers and purchases. Payment banks provide their services through third-party individuals, referred to as payment bank agents (PBAs). PBAs are not direct employees of payment banks and receive commissions based on the number of bank accounts opened and transactions made.

Microfinance Institutions and Credit Officers: The Indian microfinance industry has evolved dramatically since its inception, with microfinance institutions (MFIs) maturing and broadening their range of services. Despite this evolution, most MFIs across India still transact with customers in cash and are only gradually integrating digital platforms. MFIs typically employ credit officers (COs) on a full-time basis to connect them with their clients, paying them a fixed salary. COs perform a variety of tasks, ranging from on-boarding and orienting customers, to performing services such as opening bank accounts, fielding customer queries, and collecting repayments. These staff members were included in our research because of their potential role in assisting customers with the transition to DFS.

[caption id="attachment_24808" align="aligncenter" width="510"]<a href="https://centerforfinancialinclusionblog.files.wordpress.com/2017/12/table-11.png"><img class="wp-image-24808" src="https://centerforfinancialinclusionblog.files.wordpress.com/2017/12/table-11.png" alt="" width="510" height="530" /></a> (click to enlarge)[/caption]

We studied one payment bank, one business correspondent company and two MFIs. Across these parameters and banking agent models, here’s what our investigation uncovered.


The technical resources are available, but support from the parent company varies

We found that business correspondents and payment bank agents have adequate access to the means to conduct their transactions, but encounter technical issues during facilitation of digital transactions. BCs receive moderate support from their aggregators and financial institutions but complain of a lack of attention during busy times, such as the beginning of the month when withdrawals are typically high. The PBAs we spoke with received little to no support from their parent institution, thereby heavily affecting agents’ awareness of products, which consequently hinders customer demand. Similarly, in terms of financial resources, BCs and PBAs report struggling with financial liquidity. (Credit officers associated with MFIs do not use digital platforms at this time, but reported being well-supported by their employer.)
<h4>They know but they don’t necessarily share</h4>
We found that PBAs had high levels of awareness about the DFS market in India, followed by BCs and COs. However, PBAs are weak in passing on information to their customers. BCs and COs are in a position to share their knowledge about DFS with their customers but lack incentives to do so. In terms of levels of digital literacy, we saw that PBAs have good knowledge and skills and are adept at using smartphones and other technical devices. They could help compensate for customers’ poor digital literacy skills. BCs are less knowledgeable on this front, while COs ranked the lowest. BCs and COs seemed to enjoy high levels of trust among their customers, while PBAs did not.
<h4>Compensation matters for motivation</h4>
We saw that the least motivated agents were also the most poorly compensated. BCs were more adequately incentivized compared to COs and PBAs. For CO and PBA agents, orienting new customers to use DFS was hardly worth the effort.
<h4>What Can FSPs Do Better?</h4>
The more we talked with agents during our research, the more we became convinced that agents are an enormous and necessary resource for bringing about India’s transition to digitally-based financial inclusion. Agents are the bridge between FSPs and last mile customers, not only in a practical sense as transaction facilitators, but through their human touch. Our discussions with agents, branch managers, and senior executives of financial organizations revealed important insights into the opportunities and challenges that exist for each type of financial service provider in building effective agent networks.

[caption id="attachment_24801" align="aligncenter" width="510"]<a href="https://centerforfinancialinclusionblog.files.wordpress.com/2017/12/table-2.png"><img class="wp-image-24801" src="https://centerforfinancialinclusionblog.files.wordpress.com/2017/12/table-2.png" alt="" width="510" height="701" /></a> (click to enlarge)[/caption]

In summary, we found that commercial banks working with business correspondents could increase their support to agents by maintaining regular contact with them, helping them troubleshoot technical problems and strengthening the financial incentives for better outcomes for both banks and last mile consumers. For payment banks, given the novelty of their product, it is important for them to find their unique selling proposition and carve out a niche for themselves where they can sustainably provide value-added services in the era of cut-throat competition from several new age fintech providers. To increase their outreach, we found that payment banks have to substantially increase their product marketing to increase awareness and demand among their customers. Lastly, microfinance institutions can gradually start shifting their customers onto digital platforms by taking small steps at a time, such as digitizing the process of loan disbursement and repayment. In this context, credit officers can act as key nodes of influencers among the institutions’ customers.

For more, read the new report, <a href="http://www.centerforfinancialinclusion.org/storage/Agents_of_Change_India_FINAL.pdf">Agents of Change: How the Human Touch Is Bringing Digital Financial Services to New Customers in India</a>.

Have you read?

<a href="https://cfi-blog.org/2016/08/11/exploring-responsible-agent-management-in-india/">Exploring Responsible Agent Management in India</a>

<a href="https://cfi-blog.org/2016/09/12/digitizing-self-help-groups-in-india/">Digitizing Self-Help Groups in India</a>

<a href="https://cfi-blog.org/2016/06/13/indian-microfinance-gets-serious-about-grievance-redressal/">Indian Microfinance Gets Serious about Grievance Redressal</a>

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How Successful Are Banking Agents in Bringing Digital Financial Services to New Customers in India?

Former Fellows

Elizabeth brings over a decade of nonprofit and business experience to CFI with expertise in marketing and communications strategy, digital communications, branding, content management, and creative direction. At CFI, she ensures that all content &#8211; internally and externally &#8211; builds CFI&#8217;s reputation as a thought leader.
Prior to joining CFI in February 2023, Elizabeth was the head of marketing for Divine Chocolate USA, a global social enterprise. Her work supported the company’s vision to advance human rights in global supply chains through its farmer-owned, fair trade business model. Elizabeth also spent four years working for various nonprofits on communications initiatives related to global philanthropy, refugees, education, and leadership development.
Elizabeth graduated from the University of North Carolina at Chapel Hill with a bachelor’s degree in political science. She also holds a master&#8217;s degree in international human rights from the University of Denver and a certificate in nonprofit management from Duke University.

Communications Manager

Elizabeth Miller

Colin joins CFI as a research specialist with a background in project design, monitoring and evaluation, and social performance management. He supports research projects as well as the implementation of data collection, management, review, and presentation; drafting blog posts and reports; planning events and workshops, among other things.
Colin previously worked as the social performance manager at Small Enterprise Foundation, the largest MFI in South Africa, where he led a team responsible for gathering and analyzing insights on client progress, satisfaction, and challenges. He also reviewed and developed the organization&#8217;s social performance practices, in addition to working on the design, monitoring, and evaluation of financial education and savings projects.
Prior to that, Colin spent time developing M&amp;E tools for BancoSol in Bolivia, consulted with nonprofits and family philanthropic foundations in the DC area to strengthen internal operations, and was an intern on the Bankers without Borders team at Grameen Foundation.
Colin has an M.A. in social enterprise from American University: School of International Service and a B.A. in anthropology from Sewanee.

Research Specialist

Colin Rice

Dunja is responsible for the implementation of A2ii communications and digital learning strategies and their alignment with the overall A2ii critical success factors. Dunja&#8217;s background is in capacity building, communications, and media development. Before joining A2ii, Dunja was with the European Central Bank Internal Communications team.
In the CEE region, Dunja worked in institutional strengthening and development with the USAID-IREX, UNDP, and OSCE.
Passionate about moving standard professional e-learning practices in new directions, towards engaging and memorable experiences, Dunja is responsible for the launch of A2ii’s digital learning platform <a href="https://connect.a2ii.org/">Connect.A2ii</a>.

Communications and Digital Learning Manager, Access to Insurance Initiative

Dunja Latinovic

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Sugandh Saxena is the CEO of Fintech Association for Consumer Empowerment (FACE), a not-for-profit industry association committed to building a robust fintech ecosystem in India and aims to drive ethical lending practices among the Indian fintech sector. Sugandh comes with over two decades of experience across sectors like microfinance, social-economic development, technology, and non-profit.
Sugandh has diverse, well-rounded, and hands-on experience in leading sector-building works through the industry body and the SRO. As the head of self-regulation and compliance at MFIN, an SRO for the microfinance sector, she played a pivotal role in shaping the microfinance industry by leading conversations with regulators and industry players to formulate and enforce ethical guidelines for the industry. She has also held roles at ACTED, ITC, Self Employed Women&#8217;s Association (SEWA) Bharat, and Bharat Electronics.
Sugandh is an electronics engineering graduate from MNNIT, Allahabad, and a postgraduate in social policy from the London School of Economics and Political Science (LSE). She is a recipient of the UK Government Commonwealth Scholarship and a recent fellow at the Fletcher School Leadership Program for Financial Inclusion at Tufts University. She has extensively educated herself in financial inclusion issues like policy, regulation, compliance, risk management, customer protection, and financial education, including &#8216;Strategic Leadership for Microfinance&#8217; at Harvard Business School.
At FACE, Sugandh aims to drive the association&#8217;s efforts to engage in an active dialogue with policymakers, regulators, digital lenders, and other market participants to build an ethical, safe lending ecosystem for consumers.
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CEO, Fintech Association for Consumer Empowerment (FACE)

Sugandh Saxena

Lakshmi is a climate change and international development expert. She works with international organizations on their climate change strategy, and the design and supervision of climate finance projects, particularly in the agri-food sector.
Previously, she was with FAO Bangladesh where she led the climate portfolio. Between 2013 and 2019, she was a part of the science and technical advisory body to CGIAR, where she worked on foresight, impact assessments, and program reviews – with a focus on climate change, poverty, and natural resource management.
She has also worked at the International Finance Corporation (IFC), India in the Sustainable Energy Finance Advisory Services, and at the Centre for Microfinance at IFMR Research (now Krea University), India where she was a program head.

Lakshmi Krishnan

Renee Chao-Beroff is the CEO of CIDR Pamiga, MD of Pamiga Finance SA, and co-founder and Chairman of the Board of Wi-Agri, Côte d’Ivoire, the first one-stop shop agritech in francophone West Africa dedicated to smallholder farmers and women in agriculture value chains.

CEO, Pamiga

Renee Chao-Beroff

Mrs. Hang Nguyen is a Senior Operations Officer with the IFC Creating Market Advisory Team, East Asia and the Pacific. She leads and oversees the financial sector advisory program in the Pacific since May 2018, including technical advisory projects on Payments and Remittances, Capital Markets and Affordable Housing. In addition, Hang has over nine years of experience in East Asia region covering a broad range of projects including Financial Infrastructure, Capital Markets Development, Banking Sector Advisory. Prior to joining IFC, Hang worked in corporate banking sector at leading international banks ABN AMRO, CITIBANK and HSBC. She holds a Master Degree in Economics of Banking and Finance and is passionate about inclusive financial sector development in emerging economies.

Senior Operations Officer, Creating Markets Advisory, East Asia and The Pacific, IFC

Hang Nguyen

Mohamad Nazirwan (Iwan) is a microbanker and responsible financial inclusion specialist. Iwan has solid background in financial inclusion, microbanking including Islamic microfinance, MSME finance, and MSME credit reporting.  His professional career nearly 30 years is quite unique as it an interwoven of a banker and an international development practitioner.  Iwan entitles technical knowledge and expertise in financial inclusion framework and implementation through government enabling policy and business interventions. During his career as a Senior Financial Sector Specialist of the World bank’s Global Practice, he also involved in cross-cutting initiatives on financial inclusion and MSME access to finance in Indonesia.
He also a speaker in many international workshops and seminars on microfinance and financial inclusion events such as India Microfinance Association Annual Event, Asian Banker Summit, Asia Microfinance Conference, APEC SME financiers Workshop and so forth. Iwan holds PhD from Victoria Universty Australia with research focus on Islamic-community-based microfinance in Indonesia.

Iwan Nazirwan

Dr. Alok Misra has 30 years of professional experience in international development, rural finance, microfinance, inclusive finance and research at both policy and implementation level. He started his career with India&#8217;s apex rural development bank (NABARD) in 1992 wherein his work spanned financial sector supervision, institutional development, microfinance, agricultural/rural finance and rural livelihoods/MSME finance. He was also a part of the multi-institutional task force (2003-2004) responsible for setting up India&#8217;s first online demutualized commodities exchange (NCDEX).
In 2008, he shifted to a global microfinance rating, policy analysis and technical advisory agency. Before coming to MFIN as CEO &amp; Director, Dr. Misra was Professor and Chairperson, School of Public Policy &amp; Governance at Management Development Institute (MDI), Gurgaon. He has served as a board member of MFIN, Vaya Finserv and member of NABARD&#8217;s strategic group on microfinance.
He is a member of Inclusive Finance India Group of Advisors, member of Digital finance working group constituted by ITU, Geneva. Dr. Misra is closely associated with international initiatives like SPTF and Smart Campaign and has worked across 24 countries in Asia, Africa, Europe, and Pacific. He has written numerous articles and reports and authored &#8220;Inclusive Finance India report&#8221; for two years.
Dr. Alok Misra holds a PhD in Development Studies from Victoria University of Wellington, Master in Development Management (Gold Medallist) from Asian Institute of Management, Manila. He was awarded ADB-Government of Japan scholarship for MDM programme and NZAID scholarship for his PhD. He has been trained at Harvard Business School in &#8220;Strategic leadership for Microfinance&#8221; and was a Fellow, Fletcher Leadership Program for Financial Inclusion at Tufts University.

Alok Misra

Dr. Jennifer Isern, CFA, brings over 30 years of experience in development in more than 70 countries.  She launched Catalyze Global Impact LLC in 2019 to promote investing and technical assistance to leverage financial and private sector solutions that improve quality of life for people globally. Previously, Dr. Isern served 23 years in multiple roles in the International Finance Corporation (IFC) and the World Bank Group, including as Senior Manager in South Asia and later in East Asia and the Pacific. With the World Bank Group, Dr. Isern was based in New Delhi (2009-2016) and Hanoi (2016-2019) leading regional teams to support our clients on financial and private sector development with focus on expanding access to finance for households and SMEs, fintech and payments, financial infrastructure, debt resolution and insolvency, agribusiness, and capital markets. Dr. Isern has authored more than 50 publications on financial sector development and broader development issues. She serves on several boards and as advisor to foundations, investment funds, and associations in Europe and the USA.
Earlier, Dr. Isern worked as Lead Microfinance Specialist at CGAP, the Consultative Group to Assist the Poor, a global partnership housed at the World Bank Group of more than 30 leading development organizations that works to advance the lives of low-income people through financial inclusion.  From 1996 to 2009, she contributed as member of the senior management team, manager for CGAP&#8217;s work in Africa and China, and manager of CGAP&#8217;s network of regional representatives globally. Dr. Isern led several CGAP global initiatives on payments, anti-money laundering, appraising, funding and capacity building for microfinance institutions, and African financial sector development.  Prior to joining CGAP, she served as the Regional Technical Adviser for economic development in West and Central Africa with CARE International, and she founded and managed financial service providers while living in Niger (1990-91), and Togo (1992-1996).  From 1988-1992, Dr. Isern consulted with public and private sector clients including USAID in Costa Rica and Senegal, UNDP in New York, and AT&amp;T’s international division.
A CFA charterholder, Dr. Isern received her bachelor&#8217;s degree from the University of Montana, her master’s degree in development economics from Princeton University, and her doctorate in both finance and international business from Nova Southeastern University. Dr. Isern served as visiting professor at the Princeton University Public Policy School in 2008-2010 and regularly presents at international training programs, universities, and conferences on financial and private sector issues.

Jennifer Isern

Dr. Enjiang Cheng currently works as a Program Officer in China and the world at Ford Foundation’s Beijing office. Before joining the Ford Foundation in July 2016, Dr. Cheng was an Associate professor at Victoria University in Australia. Dr. Cheng has conducted research and consultant assignments mainly in inclusive finance, agricultural economics and poverty reduction.

Program Officer, Ford Foundation, Beijing 

Enjiang Cheng

Ira W. Lieberman Ph.D. was President and Chief Executive Officer of LIPAM International, Inc., from October 2004 to December 2020. In this capacity, he advised governments, not-for-profit institutions, and private companies in emerging, transition, and developing market countries. Much of his advisory work has been focused on the microfinance sector where he has served on the board of directors of several institutions in the sector and has raised funds primarily for microfinance investment funds in Africa.
Ira worked for the World Bank in Washington DC from 1993–2004 and from 1985–1987 in several positions, including the following: Senior Advisor, ECA Region from February 1993 to July 2004; Acting Director of the Global Small Business Department for the World Bank Group (IFC and IBRD); Chief Executive Officer of the Consultative Group to Assist the Poorest (CGAP), the international secretariat for the microfinance sector; Senior Manager for Privatization and Restructuring Private Sector Development Department; and Ira worked in several countries on crisis resolution and postcrisis industrial restructuring—Mexico (1985-1987), Korea (1998-2001), Turkey (2001- 2002) and Argentina (2002)
On leave from the World Bank from July 2003 to July 2004, Ira worked with the Open Society Institute (Soros Foundation) as a Senior Economic Advisor to George Soros, focusing on creating a microfinance investment fund for Southeast Europe. He continued his employment with the Open Society Institute until November 2004. Prior to joining the World Bank, Ira had almost 20 years of experience in the private sector
Ira has been a director of several companies including several publicly listed companies. He has also served on the boards of several not-for-profit institutions primarily focused on microfinance and social (impact) investing.
Ira has written extensively and has been published on four principal topics—the transition economies of Central and Eastern Europe and the former Soviet Union; privatization and restructuring; financial crises and workouts/ resolution strategies; and microfinance. His latest books are In Good Times Prepare for Crisis (Brookings Press, 2018), as co-author, The Crisis of 2020-2021 and Beyond (2022), and as co-editor, The Future of Microfinance (Brookings Press, 2020).
Ira has a BA from Lehigh University an MBA from Columbia University and a Ph.D. (D.Phil.) from Oxford University.

Ira Lieberman

Nina Holle is a researcher and consultant, focusing on social and environmental protection. She is passionate about creating inclusive and just societies, rethinking economics, and empowering girls and women. She also loves communicating complex issues to a broad audience.
In the past, Nina consulted with a wide range of organizations including the World Bank, the United Nations, KfW Development Bank, GiZ, Kiva, UNICEF and the German Federation for the Environment and Nature Conservation.
Before becoming an independent consultant, Nina worked for more than a decade as a development analyst and specialist with the World Bank in Washington D.C, advancing and digitizing large-scale social safety nets such as the Benazir Income Support Programme (BISP) as well as with CGAP investigating the impact of financial inclusion.
Nina received her master’s in economics, philosophy, and history from Ludwig-Maximilians-Universität, Munich. She also completed the Postgraduate Program in International Affairs of the German State Department and the German Academic Scholarship Foundation. Nina speaks German, English, and Spanish fluently as well as some Portuguese, Italian, French, and Bahasa.

Social Protection & Financial Inclusion Expert

Nina Holle

Till Bruckner is a political scientist and international development professional with over ten years of experience in microfinance.

Independent Consultant

Till Bruckner

Todd A Watkins, PhD, is a professor of economics and executive director of the <a title="https://business.lehigh.edu/centers/martindale-center" contenteditable="false" href="https://business.lehigh.edu/centers/martindale-center">Martindale Center for the Study of Private Enterprise</a> at Lehigh University. Author of more than 75 related publications, his research, and teaching focus on the intersection of inclusive finance, sustainable economic development, social entrepreneurship, and public policy. Author of the book <a title="https://doi.org/10.1142/10054" contenteditable="false" href="https://doi.org/10.1142/10054">Introduction to Microfinance</a> (World Scientific 2018) and co-editor of <a title="https://www.brookings.edu/book/the-future-of-microfinance/" contenteditable="false" href="https://www.brookings.edu/book/the-future-of-microfinance/">The Future of Microfinance</a> (Brookings, 2020), Dr. Watkins founded and directs Lehigh&#8217;s Microfinance Program, and was a founding member of the advisory Faculty Council for Accion International&#8217;s Center for Financial Inclusion, which seeks to promote innovation and growth of commercial microfinance worldwide. He serves as a board member and past president of the <a title="https://therisingtide.org/" contenteditable="false" href="https://therisingtide.org/">Rising Tide Community Loan Fund</a>, which targets the business development credit needs of low-to-moderate-income communities in eastern Pennsylvania, USA, and as an officer on four other regional and national non-profit boards. Watkins earned a B.S. in optics from the University of Rochester and his Ph.D. and Master&#8217;s in public policy from Harvard University.

Todd A. Watkins

Larry Reed is a 2019 CFI Research Fellow investigating how G2P (government-to-person) payments can be a more effective on-ramp for financial inclusion.
Larry is the Senior Fellow for Financial Inclusion at RESULTS, a citizen’s advocacy group seeking to bring about legislation and policies that contribute to the elimination of extreme poverty around the world. As an advocate for the expanded use of the Ultra-Poor Graduation Approach, Larry conducts research, writes articles and organizes events to help government leaders learn how to apply this approach to their anti-poverty social welfare programs. Larry also spent 13 years with Opportunity International, including five years as their Africa Regional Director and eight years as the first CEO of the Opportunity International Network.
Larry has authored the Global State of Ultra-Poverty, the State of the Microcredit Summit Campaign Reports from 2010 to 2016 and has contributed to several books on finance and the poor including “The New World of Microfinance” (Rhyne, Otero, et. al., 1996), “Serving with the Poor in Africa” (Yamamori, Myers, Bediako and Reed, 1996), “Globalization and the Kingdom of God” (Goudzwaard, 2001) and “More Pathways Out of Poverty” (Harris et. al., 2006).
Larry is a graduate of Wheaton College and the John F. Kennedy School of Government at Harvard University. He and his wife Sandy have three children and three grandchildren.

Senior Fellow, RESULTS

Dan Kleinbaum is a 2019 CFI Research Fellow investigating how fintechs and financial institutions are using APIs to reach underserved customers.
Dan is the Entrepreneur in Residence at <a href="http://www.dfslab.net/">DFS Lab</a>, where he is supporting the next wave of fintech companies and helping build out the global fintech ecosystem. Prior to joining DFS Lab, Dan co-founded and served as the Chief Operating Officer at Beyonic, a payment aggregator offering streamlined APIs and other tools for businesses to connect to mobile money networks throughout sub-Saharan Africa.

Entrepreneur in Residence, DFS Lab

Vinita Godinho is the General Manager of Advisory Services at <a href="https://goodshepherdmicrofinance.org.au/">Good Shepherd Microfinance</a> (GSM), Australia’s largest microfinance provider. As part of her Fulbright Visiting Scholars Fellowship, Vinita is serving as a CFI Research Fellow focusing on behaviorally-informed interventions to improve the financial health and well-being of low-income families and individuals in Australia and elsewhere.
At GSM, Vinita has established a fully sustainable advisory and consulting function, focusing on inclusive finance, and leads the research function to provide policy, positioning, intellectual leadership and impact evaluation. She has over 20 years of financial sector experience as a banker in India and Australia and has been widely recognized as an influential and respected leader in financial inclusion, action research, community development and financial services, having completed her doctoral studies on financial inclusion and well-being for Indigenous Australians.

General Manager, Advisory Services, Good Shepherd Microfinance 

Vinita Godinho

Patrick Traynor is an Associate Professor in the Department of Computer and Information Science and Engineering (CISE) at the University of Florida. His research focuses on the security of mobile systems, with a concentration on telecommunications infrastructure and mobile devices. His research has uncovered critical vulnerabilities in cellular networks, made the first characterization of mobile malware in provider networks and offers a robust approach to detecting and combatting Caller-ID scams. He is also interested in Internet security and the systems challenges of applied cryptography. He received a CAREER Award from the National Science Foundation in 2010 and was named a Sloan Fellow in 2014.
Professor Traynor earned his Ph.D and M.S. in Computer Science and Engineering from the Pennsylvania State University in 2008 and 2004, respectively, and his B.S. in Computer Science from the University of Richmond in 2002. After promotion and tenure in the School of Computer Science at Georgia Tech, he joined the University of Florida in 2014 as part of the UFRising Preeminence Hiring Program. He is the co-director of the Florida Institute for Cybersecurity (FICS) and is also a co-founder of Pindrop Security.
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Associate Professor, University of Florida

Patrick Traynor

John Owens is an attorney and senior advisor who has provided technical advisory services, training, and research as well as managed several international development efforts focused on digital financial services, digital payments, financial inclusion, and agent networks for more than 25 years. John has also worked with regulators and policy makers across Latin America and the Caribbean as well as Asia and the Pacific, Africa, China, Eastern Europe, Russia, and the Middle East. He holds a JD in Law from Notre Dame Law School.

Alexis Beggs Olsen is an independent consultant with twenty years of experience building the capacity of financial inclusion institutions and other social benefit organizations. As a CFI Fellow, she will explore the topic of effective human touch in Kenya&#8217;s digital financial landscape.
Alexis currently researches and develops content for the <a href="http://www.centerforfinancialinclusion.org/abf-program-objectives/">Africa Board Fellowship Program</a> at the Center for Financial Inclusion and the Boulder Institute of Microfinance. Prior to consulting independently, Alexis was a Technical Advisor with Opportunity International specializing in governance as well as lending operations. She has worked in 28 countries. Alexis has a B.A. in International Development and Communications from Wheaton College.
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Alexis Beggs Olsen

Shreya is a Senior Research Associate with IFMR Lead’s Financial Inclusion team. Shreya has worked on impact evaluations of alternative financial delivery channels and livelihood rehabilitation programs, in partnership with NGOs. She is currently working on an exploratory study mapping digital financial services for the underserved in India. She has an undergraduate degree in economics from Singapore Management University.
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Senior Research Associate, IMFR Lead

Misha Sharma is a Project Manager at IFMR Lead. She works with the Financial Inclusion team and is currently leading projects based out of South India evaluating the impact of access to finance on the overall well-being of the rural poor. Her research work primarily focuses on studying alternative channels of financial services for the poor.
Prior to joining IFMR Lead, Misha worked with Goldman Sachs as an Operations Analyst. Misha holds a Master’s Degree in Economics from University of Edinburgh and a Bachelor’s Degree in Economics from Stella Maris College, Chennai.
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Project Manager, IMFR Lead

Justyna manages research projects and is the author of the annual publication on the state of microfinance industry in Eastern Europe and Central Asia. She also conducts market research studies in the demand for microfinance products (credit, savings, microinsurance), access to finance and the use of financial services, and indebtedness, using a variety of research techniques (e.g., focus group discussions, in-depth interviews, questionnaire-based surveys). Justyna has 20 years of experience working in development in Eastern European countries and the Commonwealth of Independent States. She has 12 years of experience in conducting microfinance research, including hands-on experience conducting qualitative research and quantitative data analysis using statistical software, and writing and publishing articles on the state of microfinance in the region.
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Research Manager, The Microfinance Centre

Justyna Pytkowska

Christy Stickney is an independent development consultant, and has worked in financial services and inclusive market development since 2010. Christy has been engaged in microfinance since 1993, having developed loan and savings products for women micro-entrepreneurs and then going on to design a variety of other types of financial products and services. She has worked in international development for over two decades, most recently with Habitat for Humanity International as Director of Housing Finance for Latin America and the Caribbean. During her time with Habitat, Christy oversaw a variety of programs seeking innovative approaches to housing microfinance, financial education, raising investment capital, leveraging remittance flows, and mobilizing government subsidies – all for improved housing.
Christy has also worked with Opportunity International, directing technical assistance and financial support to poverty-focused loan and savings programs around the world, and as a consultant with the Agros Foundation.
She has lived throughout Latin America and the Philippines, and is currently based in San Jose, Costa Rica.
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Christy Stickney

Leon Perlman is a doctoral-level expert in digital financial services, payments systems, financial inclusion, mobile technology, and compliance, with over 16 years of experience in the sector. He has experience advising central banks, finance ministries, the ITU, the Gates Foundation, GSMA, the World Bank/IFC, and the World Economic Forum.
A former scientist and successful entrepreneur, Leon has worked in the telecommunications and micro-payments industry since the mid 1990’s and has a wide range of experience in both developed and developing markets. Leon holds the degrees of BSc, BSc (Hons), MSc, BProc (Law), LLB, and LLD.
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Leon Perlman

Guy is Executive Director of Microfinance Opportunities (MFO). He has extensive experience conducting research on the financial capabilities of low-income consumers. His research has been published in books, peer reviewed journals, working papers, and blogs.
Before becoming Executive Director at MFO, Guy received his PhD from the University of Chicago in 1994, and subsequently worked in Chicago in the field of community economic development. He then served 13 years as a lecturer in public policy at the Harvard Kennedy School of Government, teaching courses in management and microfinance. Additionally, he was a Senior Advisor to MFO and served as Principal Investigator on five Financial Diaries studies and as project leader for the development of the Financial Capabilities Index Web Portal. He continues to teach in executive education programs at HKS, and is a fellow at the Ash Center.
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Executive Director, Microfinance Opportunities

Guy Stuart

Partners

FMO Entrepreneurial Development Bank

Accion

Jayshree Venkatesan

As digitalization increases and new consumer risks emerge, how can the inclusive finance community continue advocating for the privacy and protection of vulnerable populations? This post is part of a blog series highlighting FIW 2022 sessions that touch on CFI’s four strategic priorities.

Mayada El-Zoghbi

As we see a shift in the inclusive finance industry towards a stronger emphasis on financial health, CFI's managing director questions whether financial health measurement should be our new focus, or simply a pulse check for the broader financial system.

Lucciana Alvarez Ruiz

Edoardo Totolo

The inclusive finance sector has only scratched the surface in exploring the intersection of climate shocks and inclusive finance. This blog post considers what we already know, the gaps that we still need to address, and how we can better understand the role of green inclusive finance.

Evelyn Stark

Reflecting on conversations from Financial Inclusion Week 2022, it's clear that women’s access and inclusion remains a top priority for the inclusive finance space. This post is part of a blog series highlighting FIW 2022 sessions that touch on CFI’s four strategic priorities.

Following the December 2022 RFF event, this guest blog post explores the links between responsible finance and climate change and shares A2ii’s work on climate and disaster risk.

API Deployment Recommendations

Related Work

This report was made possible with support from FMO Entrepreneurial Development Bank.

Recommendations to Optimize API Deployments Between Banks and Fintechs for Financial Inclusion

How secure is data used in digital credit?

What does responsible digital credit look like?

What does effective human touch look like in Kenya's digital age?

Despite significant progress toward digital financial inclusion in India, agents still matter for bringing low-income consumers into the digital financial services world.

CFI Fellow Justyna Pytkowska explores how financial services providers integrate interventions to improve financial capability into their business model.

Is G2P an On-Ramp to Financial Inclusion?

This analysis, conducted in three markets in Latin America and the Caribbean, highlights the characteristics of SME owners whose businesses have overcome significant hurdles and grown from their initial micro size.

Technology has been a pivotal and successful enabler of financial inclusion. However, even with each technical evolution, sets of technical, cost, competition, capacity and access challenges persist.

With millions of people worldwide receiving G2P payments, the potential for this scheme to serve as an on-ramp for financial inclusion is great. However, as 2016 CFI Fellow <a href="/government-to-person-transfers">Guy Stuart demonstrated</a>, G2P schemes often fall short of this goal, serving largely as mere payment repositories instead of a tool for economic advancement. Larry&#8217;s research will provide insight from the supply-side perspective, looking at the incentives, costs and ability of financial institutions to build an on-ramp that turns G2P recipients into long-term, productive customers.

Financial institutions of all sizes are finding that fintech partnerships can help them reach underserved customer segments. These partnerships frequently involve the use of APIs to create the necessary connections and data sharing between fintech and financial institution. However, it may be especially challenging for smaller financial institutions to benefit from such connections. For these providers in particular, knowledge of the landscape of APIs, including their costs and benefits, is critical to their ability to remain competitive. Dan’s research will help financial service providers and investors better understand APIs—their types, costs, and benefits—knowledge they need to thrive in a competitive marketplace.

Ten years after the advent of M-PESA, Kenya is arguably inclusive digital finance’s most mature market and one of its ongoing innovation epicenters. However, many financial service providers (FSPs) in the country are crowded at the disruptive low-touch or traditional high-touch ends of the spectrum. Initial inquiries have suggested that FSPs are increasingly motivated by the limitations at both ends of the spectrum to explore various middle paths, and FSPs want to find ways to protect their strategic advantages while leveraging the promises of technology and the power of human touch.
Over the course of one year, CFI Fellow Alexis Beggs Olsen investigated Kenya’s digital financial services (DFS) landscape, the reasons why customers still desire human touch, and the innovative ways in which FSPs integrate human interfaces into their digital product offerings to better serve customers. In Uniting Tech and Touch: Why Centaur Products Are Better for Consumers and Providers, Evidence from Kenya, Alexis takes us along the customer journeys of Kenyan DFS users to illuminate the circumstances where they prefer human touch, the variations in customer preferences across demographic characteristics, and the particular pain points of low-touch digital loans, savings and insurance products.
While there was widespread acceptance of digital transactions among respondents, Alexis finds that Kenyans primarily want human touch to verify the legitimacy of the FSP, to fully understand the product, and to resolve problems or complaints. To address these needs, Alexis recommends “centaur” solutions—ones that combine human and digital interfaces—to provide valuable human interaction to customers where it is needed most, while improving customer acquisition and retention in the process. FSPs, their customers, and the financial inclusion community can benefit from leveraging centaur solutions that combine the best of tech and touch to convert customers who are currently uncomfortable with these digital interfaces into regular digital financial services users.
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Although financial services are rapidly going digital, some customers, especially those new to the formal financial system or with lower levels of education, may still desire to interface with people—to build trust, to troubleshoot problems, and to receive advice on their financial lives. CFI Fellows Shreya Chatterjee and Misha Sharma are teaming up to explore the question of effective human touch in digital financial services as India transitions to a digital age.
<h2>Despite significant progress toward digital financial inclusion in India, agents still matter for bringing low-income consumers into the digital fold.</h2>
In Agents of Change: How the Human Touch Is Bridging Digital Financial Services to New Customers in India, the Fellows discuss how frontline banking agents can advance both the adoption of digital financial services (DFS) and greater financial inclusion among the poor and unbanked. In the report, Misha and Shreya evaluate the factors currently shaping the adoption of DFS by emerging consumers in India and assess the crucial role that agents play in helping to successfully transition their clients to digital platforms. Specifically, while agents largely assist with product adoption and use, their value to the financial sector and the financial institutions they represent goes beyond these responsibilities—they are the key to building trust, resolving problems, and ensuring value for customers. The report also articulates the state of agent practice in India and outlines 10 principal insights on training, equipping, and promoting financial product awareness among agents within the three types of assessed institutions—commercial banks, payment banks and microfinance institutions.
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Although financial services are rapidly going digital, some customers, especially those new to the formal financial system or with lower levels of education, may still desire to interface with people—to build trust, to troubleshoot problems, and to receive advice on their financial lives. CFI Fellows Shreya Chatterjee and Misha Sharma are teaming up to explore the question of effective human touch in digital financial services as India transitions to a digital age.
<h2>Despite significant progress toward digital financial inclusion in India, agents still matter for bringing low-income consumers into the digital fold.</h2>
In<a href="storage/Agents_of_Change_India_FINAL.pdf"> Agents of Change: How the Human Touch Is Bridging Digital Financial Services to New Customers in India</a>, the Fellows discuss how frontline banking agents can advance both the adoption of digital financial services (DFS) and greater financial inclusion among the poor and unbanked. In the report, Misha and Shreya evaluate the factors currently shaping the adoption of DFS by emerging consumers in India and assess the crucial role that agents play in helping to successfully transition their clients to digital platforms. Specifically, while agents largely assist with product adoption and use, their value to the financial sector and the financial institutions they represent goes beyond these responsibilities—they are the key to building trust, resolving problems, and ensuring value for customers. The report also articulates the state of agent practice in India and outlines 10 principal insights on training, equipping, and promoting financial product awareness among agents within the three types of assessed institutions—commercial banks, payment banks and microfinance institutions.
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Christy Stickney, CFI Fellow and independent consultant, highlights the characteristics of owners of small and medium-sized enterprises (SMEs) whose businesses have overcome significant hurdles and grown from their micro size.
Christy has utilized qualitative research to identify and analyze clients of MFIs whose borrowing had increased significantly over time from the portfolios of three leading microfinance institutions in Latin America – MiBanco (Peru), Banco Solidario (Ecuador), and Banco ADOPEM (the Dominican Republic). As part of the research, Christy conducted 55 in-depth client interviews and consulted with institution staff. She identifies and describes in detail a select group of &#8220;growth entrepreneurs&#8221; (GEs) who operate higher growth businesses, have overcome significant growth hurdles, and express a clear vision for future business growth. Christy argues that this category of emerging SMEs holds great potential for future growth and job creation.
Christy also provides recommendations for financial institutions (including microfinance institutions [MFIs]), fintechs, governments, and other financial ecosystem actors to support growth and greater financial inclusion for emerging SMEs and growth entrepreneurs.
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Technology has been a pivotal and successful enabler of financial inclusion. However, even with each technical evolution, sets of technical, cost, competition, capacity and access challenges persist. CFI Research Fellow Leon Perlman looks at the advantages, disadvantages and challenges that fasten on the existing and evolving technologies, bearer services, access platforms and user devices for mobile financial services (MFS) in Technology Inequality: Opportunities and Challenges for Mobile Financial Services. His on-the-ground research conducted in 12 different countries finds that smartphone-enabled MFS is not an impending panacea for financial inclusion. Due to the slow spread of reliable, high-quality 3G coverage and sufficiently capable smartphones, the majority of MFS will be accessed on feature phones, using Unstructured Supplementary Service Data (USSD), SIM Application Toolkit (STK) and java-applets, rather than internet-enabled smartphones, for the foreseeable future.
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In this research, Guy Stuart, assesses whether and how G2P payments increase formal financial inclusion. Stuart coupled observations, interviews and focus groups in Colombia and Pakistan with extensive analysis of reports on G2P payments covering 19 countries and quantitative data from the <a href="http://www.worldbank.org/en/programs/globalfindex">World Bank Global Findex</a>.
While Stuart’s research identifies five key mechanisms by which G2P payments could lead to greater financial inclusion, the evidence ultimately suggests that G2P beneficiaries do not take advantage of the basic and common functionality of these programs.
Stuart provides insightful recommendations for government and the private sector to design better products, optimize delivery of payments, and effectively communicate the advantages of these programs to beneficiaries.
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